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Form 200. Corporate Income Tax Declaration 2019

11.9.1.2 Income attributable to permanent establishments

The income of a permanent establishment is considered to be that which the same could have obtained if it were a separate and independent entity, taking into account the functions performed, the assets used and the risks assumed by the entity through the permanent establishment.

For these purposes, estimated income from internal operations with the entity itself will be taken into account in those cases where this is established in an international double taxation avoidance agreement that is applicable.

The income attributable to the permanent establishment is made up of:

  1. the returns from the activities or economic operations carried out by said permanent establishment.

  2. the returns derived from assets assigned to it.

  3. capital gains or losses arising from the affected assets. Assets are those that are functionally linked to the development of the activity. Assets representing participation in the equity of an entity will only be considered assets assigned to the permanent establishment when it is a branch registered in the Commercial Registry and the following requirements are met:

    • that these assets are reflected in the financial statements of the permanent establishment.

    • that the permanent establishment has, to direct and manage these holdings, the corresponding organization of personal and material means, in the event that such holdings represent a dominant position in accordance with the provisions of article 58 of the Corporate Income Tax Law.

    For these purposes, assets transferred within the three tax periods following the period of disaffection will be considered affected assets.

In cases of re-exportation of goods previously imported by the same taxpayer, the following will be considered:

  1. that there has been no change in assets if the fixed assets are temporarily imported.

  2. that there has been a change in assets if the assets are fixed assets acquired for use in activities carried out by a permanent establishment.

  3. that there has been a return on an activity or economic exploitation if it involves elements that are considered to be stock.

Taxpayers who obtain income through a permanent establishment in Spain will be taxed on all income attributable to said establishment, regardless of where it was obtained.