A recent court case has held that the municipal tax ("derrama") levied by most municipalities at a level of 10% of the standard corporate tax rate (i.e. 3.6%) is a cost which is tax deductible in arriving at corporate tax liabilities. It had previously been accepted that this tax was not so deductible. The implications of this judgement are substantial and may lead tax payers to request a revision of taxes paid in past fiscal years to which it may apply.

For further information please contact Mark Gibbins, tax partner, KPMG Peat Marwick, telephone: +351 1 311 04 06.

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