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Practical manual for Income Tax 2020.

Income subject to imputation

We must distinguish between:

• Income obtained from entities that do not carry out economic activities

Regulations: Art. 91.2 of Law IRPF

Taxpayers will impute the total income obtained by the entity not resident in Spanish territory when it does not have the corresponding organization of material and personal means for its realization, even if the operations are of a recurring nature. That is, when it is considered that these entities do not carry out economic activities.

In the case of dividends, shares in profits or income derived from the transfer of shares, the provisions of the following section shall be observed in all cases.

Total income shall be understood as the amount of the taxable base that results from applying the criteria and principles established in the LIS and in the other provisions relating to Corporate Tax for determining the same.

However, the above will not apply when the taxpayer proves that the aforementioned operations are carried out with the material and personal resources existing in an entity not resident in Spanish territory belonging to the same group, within the meaning of article 42 of the Commercial Code, regardless of its residence and the obligation to prepare consolidated annual accounts, or that its constitution and operation respond to valid economic reasons.

The group of companies referred to in Article 42 of the Commercial Code shall be understood to include multi-group and associated entities in the terms of commercial legislation.

• Income obtained from entities that carry out economic activities

Regulations: Art. 91.3 of Law IRPF

As a general rule and with the qualifications contained in article 91.3 of the Income Tax Law, the resident partner when the total income obtained is not imputable in accordance with the provisions of the previous section has the obligation to impute in the general of the tax base only the positive income obtained by the entity not resident in Spanish territory that comes from each of the following sources:

  1. Ownership of real estate , rural and urban, or of property rights that fall on these , unless they are affected by an economic activity or transferred for use to other non-resident entities, belonging to the same group of companies as the owner in the sense of article 42 of the Commercial Code, regardless of their residence and the obligation to prepare consolidated annual accounts, and are also affected by an economic activity.

  2. Participation in the equity of any type of entity and transfer of equity to third parties , under the terms provided for in the IRPF regulations, except those arising from the following financial assets:

    • Those held to comply with legal and regulatory obligations arising from the exercise of economic activities.
    • Those that incorporate credit rights arising from contractual relationships established as a result of the development of economic activities.
    • Those incurred as a result of carrying out intermediation activities in official securities markets.
    • Those held by credit institutions and insurance companies as a result of the exercise of their business activities, without prejudice to the provisions of letter g).
  3. Capitalization and insurance operations , whose beneficiary is the entity itself.

  4. Industrial and intellectual property, technical assistance, movable property, image rights and leasing or subleasing of businesses or mines , under the terms established in article 25.4 of the Personal Income Tax Law.

    However, income from image rights that must be imputed in accordance with the provisions of article 92 of the Income Tax Law will not be subject to imputation

  5. Transfer of assets and rights referred to in letters a), b), c) and d) above that generate income.
  6. Derivative financial instruments , except those designated to cover a specifically identified risk arising from the performance of economic activities.

  7. Credit, financial, insurance and service provision activities , except those directly related to export activities, carried out, directly or indirectly, with related persons or entities, in accordance with article 18 of the LIS , resident in Spanish territory, insofar as they determine tax-deductible expenses in said resident persons or entities.