Income from economic activities obtained through permanent establishment
Regulations: article 13.1.a) Law IRNR
In accordance with internal regulations, the income from economic activities carried out through a permanent establishment (PE) located in Spanish territory is understood to be obtained in Spanish territory.
In accordance with Spanish internal regulations, a natural person or entity is considered to operate through EP when it has in Spanish territory:
- Management headquarters
- Branch offices
- Warehouses, shops or other establishments
- The mines
- Oil or gas wells
- The pits
- Agricultural, forestry, livestock or any other place of exploration or extraction of natural resources
- Construction, installation or assembly works whose duration exceeds six months
In short, when the non-resident has in Spain, for any reason, on a continuous or habitual basis, facilities or workplaces of any kind in which all or part of his activity is carried out, or when he acts in Spain through a agent authorized to contract in the name and on behalf of the non-resident person or entity, as long as he regularly exercises said powers, the non-resident will be considered to act in Spain through EP.
When an agreement to avoid double taxation is applicable, the definition of permanent establishment contained in the agreement must be taken into account, which will normally be more restricted than that of the internal regulations.
Likewise, as a general rule, the agreements confirm the taxing power of the State of the PE, providing that business profits, if obtained through a PE located in Spain, or income from professional activities, if obtained through or through of a fixed base, may be subject to tax in Spain, in which case they are taxed in accordance with Spanish domestic law.
Regulations: chapter III IRNR Law, chapter I IRNR Regulations and Additional Provision tenth IRNR Law
In accordance with internal regulations, non-residents who obtain income through PE in Spain will be taxed on the entire income attributable to said establishment, regardless of the place where it was obtained.
The attributable income is made up of the income from the economic activities or operations carried out by said PE, those derived from elements affected by the PE and the capital gains or losses derived from the affected elements.
Affected heritage elements are those functionally linked to the development of the activity that constitutes their object. Affected assets will be considered those transferred within the three tax periods following that of disaffection.
The assets representing the participation in an entity's own funds will only be considered affected assets when the EP is a branch registered in the Mercantile Registry, said assets are reflected in the financial statements of the EP and, in the case of EPs that can be considered dominant companies , said EP has, to direct and manage these participations, the corresponding organization of material and personal means.
The tax base of the EP will be determined in accordance with the provisions of the general Corporate Tax regime, the regime for compensation of negative tax bases being applicable, with the following specialties:
Application of the linking rules for operations carried out by the PE with the head office, or with another PE of the same head office and with other persons or entities linked to the head office or its permanent establishments, whether located in Spanish territory or abroad.
Non-deductibility, in general, of the payments that the EP makes to the head office in respect of royalties, interests, commissions, technical assistance services and for the use or transfer of goods or rights. (See section “ estimated expenses and imputed returns for internal operations of a PE“).
Deductibility of the part of the management and general administration expenses attributed by the head office to the EP, provided that they are reflected in the financial statements of the EP and are allocated in a continuous and rational manner. To determine these expenses, it is foreseen that taxpayers may submit to the Tax Administration proposals for the valuation of the part of the management and general administration expenses that are deductible.
The difference between the market value and the book value of the following assets will be included in the tax base:
Those who are attached to a permanent establishment located in Spanish territory that ceases its activity.
Those who were previously attached to a permanent establishment located in Spanish territory are transferred abroad.
The payment of the tax debt resulting from the application of letter b) above, in the case of assets transferred to a Member State of the European Union, or of the European Economic Area with which there is an effective exchange of tax information, will be deferred. by the Tax Administration at the request of the taxpayer until the date of the transfer to third parties of the affected assets.
Estimated expenses and imputed returns for internal operations of a permanent establishment
In cases in which, by application of the provisions of an agreement to avoid international double taxation signed by Spain, the deduction of estimated expenses for operations is permitted for the purposes of determining the income of a permanent establishment located in Spanish territory. internal offices carried out with its head office or with one of its permanent establishments located outside Spanish territory, the following will be taken into account:
The non-deductibility, in general, of the payments that the EP makes to the head office in respect of royalties, interests, commissions, technical assistance services and for the use or transfer of goods or rights will not be applicable.
The income attributed to the head office or to any of the permanent establishments located outside Spanish territory that correspond to the aforementioned estimated expenses will be considered income obtained in Spanish territory, without the mediation of a permanent establishment.
The tax corresponding to the imputed income will accrue on December 31 of each year.
The permanent establishment located in Spanish territory will be obliged to withhold and pay on account for the imputed income.
The provisions of article 18 will apply to internal operations carried out by a permanent establishment located in Spanish territory with its head office or with one of its permanent establishments located outside Spanish territory, to which this Additional Provision applies. of the Corporate Tax Law.
The corresponding type of tax from among those provided for in the Corporate Tax regulations will be applied.
The general tax rate is 25%.
Deductions and allowances
The EPs may apply to their full quota, the same deductions and bonuses as the Corporation Tax taxpayers, giving rise to the liquid quota of the tax, which, for the tax periods that begin From January 1, 2022, in no case can it be negative.
For tax periods that begin on or after January 1, 2022 to determine the tax debt, the minimum taxation established in article 30 bis of the Tax Law will apply. on Companies (generally, 15% of the tax base) for those SOEs with a net turnover equal to or greater than twenty million euros during the 12 months prior to the date on which the tax period begins . This means that, in general, as a result of the application of deductions and bonuses, the liquid quota cannot be reduced below said amount.
Tax period and accrued amount
Regulations: article 20 IRNR Law
The tax period coincides with the financial year you declare, and cannot exceed twelve months. The tax accrues on the last day of the tax period.
Permanent establishments are obliged to undertake the same accounting, register and formal obligations as resident entities.
Regulations: article 19.2 IRNR Law
When the EPs of non-resident entities (not natural persons) transfer income abroad, a complementary tax of 19% will be payable on the amounts transferred.
However, this tax will not be applicable to those EP whose head office has its tax residence in another State of the EU ( Annex V ), unless it is a country or territory considered a tax haven, (with effect from July 11, 2021, references made to tax havens are understood to be made to the definition of non-cooperative jurisdiction . See Annex IV ) or in a State that has signed with Spain an Agreement to avoid double taxation, in which nothing else is expressly established, as long as there is reciprocal treatment.
The complementary tax is entered using form 210, in the first twenty days of the months of April, July, October or January, depending on whether the date of transfer of the income abroad falls within the previous calendar quarter.
Withholdings and payment on account
Regulations: article 23 IRNR Law
PEs are subject to the same withholding regime as entities subject to Corporation Tax for the income they receive.
Payments in instalments
PEs are obliged to pay by instalments under the same terms as those subject to Corporation Tax. The formal obligations regarding instalment payment are the following:
Terms: Within the first twenty calendar days of the months of April, October and December.
When instalment payment is not required, it will not be mandatory to file Form 202, except in the case of PEs that are considered Large Companies. In this case, Form 202 must be filed, even when no payment is required, which will result in negative self-assessments.
Regulations: article 21 IRNR Law
The EPs must submit tax returns in the same forms and within the same deadlines as resident entities subject to Corporate Tax.
Term: 25 calendar days following six months after the conclusion of the tax period.