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Practical Handbook for Companies 2021

Income attributable to permanent establishments

Regulation: Article 16 TRLIRNR

The income of a permanent establishment is the income that the permanent establishment would have earned if it had been 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, it will be taken into account the estimated income due to internal operations with the institution itself in those cases in which, as well is established in an agreement to avoid double international taxation as applicable.

They make up the income attributable to the permanent establishment:

  1. The income of the activities or economic exploitations carried out by the permanent establishment.

  2. The yields deriving from assets assigned to it.

  3. The capital gains or losses derived from the capital items affected.

    Assigned assets

    Assigned assets are those that are functionally linked to the development of the activity.

    Assets representing an equity interest in an entity shall only be considered as assets assigned to the permanent establishment if the permanent establishment is a branch registered in the Commercial Register and the following requirements are met:

    • These assets are reflected in the accounting statements of the permanent establishment.

    • That the permanent establishment has the corresponding organisation of personal and material resources to direct and manage these holdings, in the event that such holdings represent a dominant position in accordance with the provisions of Article 58 of the LIS.

    For these purposes, the assets transferred within the three tax periods following the period in which the assets are disposed of shall be considered as assigned assets.

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

  1. That there has been no change in assets in the case of temporarily imported fixed assets.

  2. That there has been a change in assets in the case of fixed assets acquired for use in the activities carried out by a permanent establishment.

  3. That there has been income from an economic activity or operation in the case of items considered as stocks.


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