Witholding tax to non-EU company

Hi,

I've been looking at a couple of the threads here and would like some further advice as the info so far seems to be concerned with UK companies and/or properties.

I am a UK agent for a US company, which provides goods (servers and software) and services (software support & maintenance) to a Spanish company.

There is a local company in Spain who interface to the end-user.

The US company invoice the Spanish company (not the end user) in US$ and the Spanish company withhold 10% of the fee when they pay us.

I recently was sent by the US company a letter from the USA IRS stating the US company and its employees are US residents for US tax purposes.

Will this enable the Spanish company to stop witholding?

John Mayo

Hi mayojs, and welcome to our forums.

This is not the first time we see this happening. There is another thread by someone asking a similar question - Spanish IVA 10% Tax withholding.

As stated previously, I don't believe such retention should be made, especially if it has to do with VAT. It could be customs duties, but as far as I know computer software is exempt. I suggest that you ask this Spanish company to quote the law or regulation by which they are withholding this 10% amount. Once you have this information, we will be more than happy to analyse whether this is legal or not.

Thanks for this.

I did look at the other thread before I posted.

The firm in question there was located in the UK, and therefore within the EU.

My parent company is based in Minneapolis, USA, from where goods & services are provided to the Spanish company, and from there to the Spanish end user.

I didn't know if this came under different jurisdiction.

I will ask the question of the Spanish company anyway

John Mayo