Limit of the deduction for international double taxation in the Personal Income Tax (IRPF)

When a taxpayer residing in Spain earns income abroad, questions often arise:

• Do I have to pay taxes again on that income in Spain?
• How does the deduction for international double taxation work?
• What limits exist?

In October 2025, the Central Economic-Administrative Tribunal (TEAC) ruled again on this issue in Resolution 8643/2023, confirming a criterion that directly affects individuals with investments, shares, or income in other countries.

At Adlanter, we translate it into clear language so you understand what this resolution means and how it affects you if you have or plan to have income abroad.

Quick summary of the TEAC resolution

The case involved a married couple who declared income obtained outside Spain (gains from the sale of shares and capital income). They paid taxes in those countries and applied the deduction for international double taxation in their IRPF.

The AEAT reviewed the declaration, and the taxpayer appealed.
The matter reached the TEAC.

The key question was:
What is understood by “part of the taxable base taxed abroad” according to Article 80 of the LIRPF?

The taxpayer argued that it was the entire amount on which the foreign country applied its tax.
The Tax Inspection and the TEAR argued that it should be the Spanish taxable base, calculated according to our domestic rules.

The TEAC confirms the Administration’s criterion:

• What matters is the Spanish taxable base attributable to that income, not the foreign base.
• The calculation must be made following Spanish IRPF rules: integration, compensation, and determination of the net balance.
• The deduction can never exceed what that income would have been taxed in Spain.

 

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What does this mean in practice?

You cannot use the foreign base

If a country withheld tax on an amount different from what Spain considers the “taxable base,” that difference cannot be used to increase the deduction.

Example:

• Abroad, they withhold tax on €4.5M.
• In Spain, after integration and compensation, your taxable base associated with that income is €143,000.

The deduction is calculated on €143,000, not on €4.5M.

The deduction has two limits, and the lower one always applies

The deduction will be the lesser of:

• What you paid abroad (after applying treaty limits).
• What that income would have been taxed in Spain (average rate × attributable taxable base).

In the resolved case, although they paid over €448,000 abroad, the deduction was limited to €32,324, because that was the “equivalent” tax under Spanish law.

It prevents income not truly taxed in Spain from generating a deduction

The TEAC insists that the deduction is not a “general compensation,” but a mechanism to avoid double taxation, not to obtain higher refunds.

Who does this criterion affect?

This criterion especially impacts:

• Investors selling shares or funds abroad
• Individuals with interest-bearing accounts or dividends outside Spain
• Expat employees with part of their salary paid in another country
• Owners of property abroad
• Individuals with international asset structures

If you are in any of these cases, the calculation of the Spanish taxable base will be key to determine whether you can deduct everything paid abroad (or not).

Why is this resolution important?

Because the TEAC:

• Reaffirms a criterion that the AEAT had already been applying.
• Closes the door to interpreting the deduction more broadly.
• Confirms that the foreign base is not relevant, except to verify that the income was taxed abroad.
• Reduces future litigation in similar cases.

In summary: If you declare foreign income in your IRPF, do not assume you can deduct everything withheld abroad. Spanish limits prevail.

How can Adlanter help?

At Adlanter, we assist many individuals with international investments and income.

We can help you:

✅ Review if your deduction is correctly applied
✅ Avoid errors that could trigger audits or penalties
✅ Optimize your international taxation within the legal framework
✅ Analyze double taxation treaties and their practical application
✅ Plan operations to minimize unnecessary foreign withholding

If you have investments outside Spain or are thinking of internationalizing your assets, this is a critical issue.

The difference between applying the deduction correctly or incorrectly can mean thousands of euros in your IRPF.

Do you want us to review your case?

If you have income or investments abroad, it is important to review how the deduction for international double taxation is applied in your IRPF. Our team specialized in tax advice and tax and accounting advisory can analyze your case, explain how this TEAC criterion affects you, and help optimize your international taxation.

Tell us your situation, and we will guide you to comply correctly with your tax obligations… without overpaying or underpaying.