Definition of permanent establishment

Regulation : Article 13.1.a) TRLIRNR and Double taxation agreements

It is considered that a natural or legal person operates through a permanent establishment in Spanish territory when, for any reason, it has, on a continuous or habitual basis, facilities or workplaces of any kind, in which it carries out all or part of its activity or acts therein through an agent authorized to contract, in the name and on behalf of the taxpayer, who habitually exercises said powers.

The fundamental characteristic of a permanent establishment is the absence of legal personality distinct from that of its head office.

## Permanent establishments shall be deemed to include management headquarters, branches, offices, factories, workshops, warehouses, shops or other establishments, mines, oil or gas wells, quarries, agricultural, forestry or livestock farms or any other place of exploration or extraction of natural resources and construction, installation or assembly works whose duration exceeds six months.

If a taxpayer has several activity centres in Spanish territory , they will be considered different permanent establishments and will be taxed separately if they carry out clearly distinguishable activities and their management is carried out separately. It will not be possible to offset income between different permanent establishments.

Convention to avoid double taxation

If a non-resident taxpayer carries out economic activities in Spanish territory and has the right to invoke the application of a Convention to avoid double taxation signed between Spain and his country of residence, it would be necessary to refer to the specific article of the Convention that defines the permanent establishment to determine whether it operates through this figure.

In general, the Agreements signed by Spain are based on the Agreement model of the Organisation for Economic Co-operation and Development (OECD), which includes a somewhat narrower definition of permanent establishment than that of domestic legislation. However, the specific Agreement should always be consulted.

Furthermore, as a general rule, the agreements confirm the taxing power of the State in which the permanent establishment is located, providing that business profits, if obtained through a permanent establishment located in Spain, or income from professional activities, if obtained through or via a fixed base, may be subject to taxation in Spain, in which case they are taxed in accordance with Spanish domestic law.