Income subject to withholding

Regulations: Article 31 Law IRNR and Article 9 IRNR Regulation

In general, income subject to tax is subject to withholding.

Exceptions to the obligation to retain:

Regulations: Article 31.4 of the IRNR Law and Article 10 of the IRNR Regulations

There is no obligation to withhold in relation to, among others, the following income:

• Exempt income according to IRNR regulations.

  However, there will be an obligation to withhold tax on certain exempt income: the exemption relating to dividends obtained by equivalent pension funds and the exemption relating to dividends obtained by collective investment institutions.

  Income exempt under a Convention to avoid double taxation.

• Income paid to taxpayers, when payment of the tax is proven.

• Capital gains.

  However, there will be an obligation to retain, with respect to:

  • Prizes derived from participation in games, contests, raffles or random combinations.

  • The transfer of real estate located in Spanish territory.

  • Income derived from transfers or reimbursements of shares or interests representing the capital or assets of collective investment institutions, except those derived from interests or interests in funds and companies regulated by article 49 of the Regulation of Law 35/2003 on collective investment institutions, approved by Royal Decree 1309/2005.

Exemption from withholding is not automatic, but requires proof to the party obliged to withhold that the circumstances that motivate its application have been met, without prejudice to the obligation of the withholding agent to declare.