Income attributable to permanent establishments

Regulation: Article 16 TRLIRNR

The income of a permanent establishment is considered 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 of the activities or economic operations developed by the permanent establishment.

2. The returns derived from assets assigned to it.

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

   Affected heritage elements

   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 the latter is a branch registered in the Commercial Registry and the following requirements are met:

   • That these assets be reflected in the financial statements of the permanent establishment.

   • That the permanent establishment has, to direct and manage these participations, the corresponding organization of personal and material means, in the event that such participations represent a dominant position in accordance with the provisions of article 58 of the LIS .

   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 items 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.