7.2.5 Deductions for international double taxation LIS

This block contains the deductions to avoid international double taxation referred to in articles 31 and 32 of the LIS generated in the tax periods 2015, 2016, 2017, 2018 and 2019, and which may or may be transferred to future tax periods due to insufficient quota.

Each of the rows or lines that make up said block respond to one of the two deduction modalities to avoid international double taxation referred to in the aforementioned articles 31 and 32 of the LIS:

Analysis of the structure of this section

DI international previous periods

In column "Pending deduction" it must be taken into account that if it is a deduction generated in any of the tax periods prior to the one being settled and started in 2015, 2016, 2017, 2018 or 2019(*), from the block "International tax. "previous periods", the balance of the corresponding deduction that was pending application at the beginning of the tax period being settled will be recorded in the respective key of this column. In any case, said balance must be the one corresponding to applying the tax rate for the tax period in which the deduction was generated.

Therefore, in column "Tax rate/generation period" the tax rate for which the reporting entity and beneficiary of the deduction paid taxes in the period in which it was generated will be stated. This column does not exist for cases in which the tax period for generating the deduction corresponds to the tax period of the liquidation.

The purpose of row "2019 Tax Rate" is to record the tax rate that the reporting entity pays in the tax period being reported.

In column "2019 pending deduction" the amounts referring to pending deductions from previous periods must be recorded.

In column "Applied in this settlement" the part (or the whole, if applicable) of the amount corresponding to the previous column "2019 pending deduction" that is applied in the settlement corresponding to the period subject to settlement will be recorded.

For these purposes, according to the provisions of section 2 of the Fifteenth Additional Provision of the LIS, in periods starting on or after January 1, 2016, for taxpayers whose net turnover is at least 20 million euros during the 12 months prior to the date on which the tax period begins, this amount may not exceed 50 percent of the taxpayer's total tax.

In key [00571] the total of the amounts recorded in the column "Applied in this settlement" will be recorded, which must be transferred to page 14 of form 200 regarding the settlement of the Tax.

Finally, in column "Pending application in future periods" the part of the deduction corresponding to the column "2019 pending deduction" that was not included in the key corresponding to the column "Applied in this settlement" will be collected. That is, it refers to the part of the deduction that, because it was not applied in the settlement of the tax period subject to declaration, remains pending application in future tax periods.

For these purposes, for tax periods beginning on or after 1 January 2016, section 2 of the Fifteenth Additional Provision of the LIS establishes that taxpayers whose net turnover is at least 20 million euros during the 12 months prior to the date on which the tax period begins, must take into account that the amount of the deductions to avoid international double taxation provided for in articles 31, 32 and section 11 of article 100 of the LIS, as well as that of those deductions to avoid double taxation referred to in the twenty-third transitional provision of this Law, may not jointly exceed 50 percent of the taxpayer's total amount.

International DI 2019

This block contains the amounts corresponding to the deductions to avoid international double taxation referred to in articles 31 and 32 of the LIS, generated in the period subject to liquidation and to which the reporting entity was entitled.

Legal ID: Tax borne by the taxpayer (art. 31 LIS)

This deduction is applied to positive income obtained and taxed abroad by entities resident in Spanish territory.

In the event that such income is taxed in the country where it was obtained and subsequently, when it is included in the taxpayer's tax base, is taxed by Corporate Tax in Spanish territory, double taxation occurs, which is sought to be avoided by applying this deduction.

In this regard, Article 31 of the LIS establishes that when the taxpayer's taxable base includes positive income obtained and taxed abroad, the lowest of the following two amounts will be deducted from the total tax:

The effective amount paid abroad for a tax of an identical or analogous nature to this Tax.
- Tax not paid because of exemptions, allowances or any other tax benefit will not be deducted.
- If an agreement to avoid double taxation is in force, the deduction may not exceed the amount specified therein.
The amount of the full tax that would have to be paid in Spain for the aforementioned income if it had been obtained in Spanish territory (In determining this amount, the reduction of income from certain intangible assets regulated in article 23 of the LIS must be taken into account, where applicable).

Consequently, all the tax paid abroad will be included in the tax base even if part of it is not deductible from the total amount.

The portion of the amount of tax paid abroad that is not subject to deduction from the total amount by application of the provisions of the previous section will be considered a deductible expense, provided that it corresponds to the performance of economic activities abroad.

In cases where the taxpayer has obtained several incomes from abroad in the tax period, the deduction will be made by grouping those from the same country, except for income from permanent establishments, which will be computed separately for each of these.

Finally, it must be taken into account that the application of this deduction has as a limit the amount of the full quota that appears in the code [00562] on page 14 of form 200.

Amounts not deducted due to insufficient full tax may be deducted in subsequent tax periods.

International economic DI: Dividends and profit sharing (art. 32 LIS)

Article 32 of the LIS regulates this deduction for international double taxation, which is intended to avoid international double taxation that arises in cases where a parent company resident in Spanish territory receives dividends or shares in the profits of its subsidiary entities resident abroad, and the profit obtained has been taxed in the territory of the subsidiary and is subsequently taxed in the territory of the parent company when it is received.

For these purposes, Article 32 of the LIS establishes that this deduction will be applied when the tax base includes dividends or profit shares paid by an entity not resident in Spanish territory.

The amount of this deduction will be the tax actually paid by the entity not resident in Spanish territory with respect to the profits from which the dividends are paid, in the corresponding amount of such dividends, provided that said amount is included in the taxpayer's tax base.

To apply this deduction, the following requirements must be met:

That the direct or indirect participation in the capital of the non-resident entity is at least 5 percent, or that the acquisition value of the participation is greater than 20 million euros.
That the participation has been held uninterruptedly during the year prior to the day on which the profit to be distributed is due or, failing that, that it is held for the time necessary to complete one year. For the calculation of the term, the period during which the participation has been held uninterruptedly by other entities that meet the circumstances referred to in article 42 of the Commercial Code to form part of the same group of companies, regardless of residence and the obligation to prepare consolidated annual accounts, will also be taken into account.

In the event of distribution of reserves, the designation contained in the corporate agreement will be observed and, failing that, the last amounts paid to said reserves will be considered applied.

Dividends or profit shares will be considered those derived from securities representing the capital or equity of entities, regardless of their accounting consideration.

This deduction will not apply in relation to dividends or profit shares received, the amount of which must be delivered to another entity on the occasion of a contract that deals with the securities from which they originate, recording an expense to that effect. The entity receiving said amount may apply said deduction to the extent that it keeps the accounting record of said securities and they meet the conditions established for this.

With effect for tax periods beginning up to December 31, 2016, the negative income obtained from the transfer of a share in an entity that had previously been transferred by another entity that meets the circumstances referred to in article 42 of the Commercial Code to form part of the same group of companies with the taxpayer, regardless of residence and the obligation to prepare consolidated annual accounts, will be reduced by the amount of the positive income obtained from the previous transfer and to which an exemption regime had been applied.

Common note to the deductions of Articles 31 and 32 of the LIS

The deduction of article 32 of the LIS is compatible with the deduction of article 31 of said Law with respect to dividends or profit shares, with the joint limit of deductibility of the full quota that would have to be paid in Spain for these incomes if they had been obtained in Spanish territory. Any excess over this limit will not be considered a tax-deductible expense, without prejudice to the provisions of article 31.2 of the LIS.

In the event of insufficient total quota to apply the deductions of articles 31 and 32 of the LIS, these may be deducted in the following tax periods.

The Administration has the right to check these deductions for double taxation applied or pending application. This right will expire 10 years after the day following the end of the period established for filing the declaration or self-assessment corresponding to the tax period in which the right to its application was generated.

After this period, the taxpayer must prove the deductions that he intends to apply by showing the liquidation or self-assessment and the accounting, with proof of their deposit during the aforementioned period in the Commercial Registry.