Withholding obligation

Details: Published: Wednesday, 12 June 2013 17:57

Withholding tax obligations in Spain.

Taxpayers obliged to withhold tax

Some of the organisations obliged to withhold tax or to deposit on account, with respect to the income they pay or deposit that is subject to non-residents income tax, are as follows:

Organisations resident in Spain (also those organisations in the tax regime for income apportionment).
The natural persons resident in Spain who undertake economic activities.
Non-resident income taxpayers with permanent establishment.
Payers of non-resident income tax without permanent establishment, regarding the work income paid which constitutes a deductible expense for calculating income.
Income apportionment organisations constituted abroad present in Spanish territory
The representative acting in the name of the insurance agency operating in a regime of free provision of services Withholding is also obligatory for taxpayers defined by the withholding regulations relating to financial assets and other securities.

Income types subject to withholding of tax

Generally, any income subject to income tax is subject to withholding of tax. There is no obligation to withhold tax in relation to the following income types:

Exempt income according to IRNR regulations. However, there will be an obligation to make withholdings with respect to certain exempt income: The exemption concerning dividends obtained by natural persons up to a limit of €1500, the exemption concerning dividends obtained from equivalent EU pension funds and the exemption concerning dividends obtained from unit trust institutions.
Income types exempt by virtue of an Agreement to avoid double taxation.
Income deposited for taxpayers when the payment of the tax is accredited.
Capital gains. However, there is an obligation to withhold tax with respect to:
- Prizes from participation in games, competitions, raffles or random combinations.
- Transfer of real estate assets situated in Spanish territory.
- Income derived from the transfer or reimbursement of stocks or shares representative of capital or assets of unit trust institutions, except those from participation in investment funds and companies regulated by section 49 of the Regulation of Act 35/2003 on unit trust institutions, passed by Royal Decree 1309/2005.

Exoneration of the withholding is not automatic, but rather requires the taxpayer obliged to withhold to accredit the circumstances motivating the application of this measure, without prejudice to the obligation to file a tax return on the part of the withholder.

Amount of the withholding

The withholding must be an equivalent amount to the tax owed deriving from the provisions of the tax itself or as established in an agreement. However, the withholder should not take into account the following expenses or deductions (which are applicable on calculating the tax): Deductible expenses, the liability of the special tax on fixed assets belonging to non-resident organisations and the deduction for donations.