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Spain Computer Software Imports--Withholding Tax On Software

Issues related to trading with Spain, such as importing regulations, documentation requirements, custom information, etc.

Spain Computer Software Imports--Withholding Tax On Software

Postby bridgat » Mon Nov 17, 2008 1:39 am

Computer Software Imports--Withholding Tax On Software Royalties

For taxation purposes, software sales are treated as income from royalties. Income derived from international software sales is subject to foreign income tax laws. Forty-eight countries have tax treaties with United States. A number of countries have withholding taxes listed as "exempt," meaning that software sales in that country are subject to tax only in the United States. Each rate has been taken directly from the country-specific Double Taxation Treaty. Countries that have a tax treaty with the United States but that are not listed in the following tables are Malta and Netherlands Antilles/Aruba.

If a country has no bilateral tax treaty with the United States, the table will read "unknown." In this case, the U.S. company is entitled to a foreign tax credit. For more information on the tax that will be charged in that country, call the country's Embassy. For more information on bilateral tax treaties or withholding taxes, contact the Internal Revenue Service, Tax Payer Service and Compliance at (202) 874-1460.

Imports Into Spain

Under the U.S. Spain Tax Treaty, the tax rate that applies to payments connected to licenses of software is controversial. Any payment related to a license of software could be deemed as a royalty. However, we could reasonably argue that a royalty does not exist when the vendor simply transfers the ownership of a copy of standard software, as a copyrighted good, and the purchaser accepts certain restrictions regarding any subsequent use of the software.

Spanish Tax authorities have taken the position that those payments are due to the use of the right to use a literary work or a scientific work. Consequently, these royalties should be subject to a percent tax rate. However, certain commentators and Courts, including the Supreme Court, have sustained that these payments relate to the use or the right to use an intellectual property right and they must be subject to 5% rate. The Spanish Tax Authority considers computer programs as literary works ("obras literarias"), which are subject to a 5 % rate.

The withholding tax regime does not change in the case of software distributed over the Internet. That regime basically depends on the characterization of the subsequent payments as royalties. Spanish laws are unclear on the characterization of the transaction that takes place when software is downloaded.
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Re: Spain Computer Software Imports--Withholding Tax On Software

Postby Guest » Wed Feb 04, 2009 9:14 pm

I was wondering where the referenced table is?

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