Income to be attributed to the taxable base

Regulation: Article 100.2 and 3 LIS

1. Article 100.2 of the LIS establishes that taxpayers will impute the total income obtained by the entity not resident in Spanish territory or the permanent establishment, when these do not have the corresponding organization of material and personal means for its realization, even if the operations are of a recurring nature.

   ## Total income shall be understood as the amount of the taxable base that results from applying the criteria and principles established in the Corporate Tax Law, as well as in the other provisions relating to this Tax for determining the same.

   The imputation referred to in this section, will not apply when the taxpayer proves that the aforementioned operations are carried out with the material and personal means existing in an entity not resident in Spanish territory belonging to the same group, in the sense of article 42 of the Commercial Code, independently of its residence and the obligation to prepare consolidated annual accounts, or that its constitution and operation respond to valid economic reasons.

2. In the event that the provisions of the previous section do not apply, the provisions of article 100.3 of the LIS will apply, according to which only the positive income obtained by a non-resident entity that comes from each of the following sources will be imputed:

   1. Ownership of rural and urban real estate or property rights that fall on them , unless they are affected by an economic activity, or transferred for use to non-resident entities belonging to the same group, within the meaning of article 42 of the Commercial Code, regardless of their residence and the obligation to prepare consolidated annual accounts, and are also affected by an economic activity.

   2. Participation in the equity of any type of entity and transfer of equity to third parties , under the terms provided for in sections 1 and 2 of article 25 of Law 35/2006, of November 28, on Personal Income Tax.

      Positive income from the following financial assets shall not be deemed to be included in this letter b) :

      • Those held to comply with legal and regulatory obligations arising from the exercise of economic activities .

      • Those that incorporate credit rights arising from contractual relationships established as a consequence of the development of economic activities .

      • Those incurred as a result of the exercise of intermediation activities in official securities markets .

      • Those held by credit institutions and insurance companies as a result of the exercise of their activities, without prejudice to the provisions of letter i) below.

        The positive income derived from the transfer of own capital to third parties shall be deemed to arise from the performance of credit and financial activities referred to in letter i) below when the transferor and the transferee belong to a group of companies within the meaning of article 42 of the Commercial Code, regardless of residence and the obligation to prepare consolidated annual accounts, and the transferee's income comes, at least 85 percent, from the exercise of economic activities.

   3. Capitalization and insurance operations , whose beneficiary is the entity itself.

   4. Industrial and intellectual property, technical assistance, movable property, image rights and leasing or subleasing of businesses or mines , under the terms established in article 25.4 of Law 35/2006.

   5. Transfer of assets and rights referred to in letters a), b), c) and d) above that generate income.

   6. Derivative financial instruments , except those designated to cover a specifically identified risk arising from the performance of economic activities.

   7. Insurance activities, credit activities, financial leasing operations and other financial activities except in the case of income obtained in the exercise of economic activities, without prejudice to the provisions of letter i) below.

   8. Operations on goods and services carried out with related persons or entities within the meaning of article 18 of the LIS, in which the non-resident entity or establishment adds little or no economic value.

   9. Credit, financial, insurance and service provision activities carried out , directly or indirectly, with persons or entities resident in Spanish territory, and linked within the meaning of article 18 of the LIS, insofar as they determine tax-deductible expenses in said resident persons or entities.

It should be noted that only the income that is positive from each of the indicated sources will be included in the tax base.