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Non-Resident Taxation Manual (February 2024)

Income from economic activities obtained without the mediation of a permanent establishment

Internal regulations

Regulations: article 13.1.b) Law IRNR

In accordance with internal regulations, the income from economic activities carried out without the mediation of a permanent establishment located in Spanish territory is understood to be obtained in Spanish territory, in the following cases:

  • When economic activities are carried out in Spanish territory.

    However, income derived from the installation or assembly of machinery or facilities from abroad will not be considered income obtained in Spanish territory when such operations are carried out by the supplier and their amount does not exceed 20% of the acquisition price; nor, those satisfied due to international sales of merchandise, including accessory expenses and mediation commissions.

  • When it comes to provision of services used in Spanish territory. When these provisions of services partially support economic activities performed on Spanish territory, earnings considered to have been obtained in Spain will only be those supporting the activity performed in Spain.

  • When they derive, directly or indirectly, from the personal performance in Spanish territory of artists and athletes, even when they are received by a different person or entity.

Agreement

When an agreement to avoid double taxation is applicable, as a general rule and, without prejudice to the peculiarities contained in the different agreements, the treatment that most of them give to the income from economic activities or exploitations obtained without mediation permanent establishment is as follows:

  • Business benefits: Normally, business profits obtained without the mediation of a permanent establishment can only be taxed in the country of residence of the taxpayer, being exempt in Spain in application of the Convention.

  • Professional activities: In general, as in the previous case, the Agreements only attribute the tax power to tax these incomes, obtained without a fixed base in Spanish territory, to the country in which the taxpayer resides, being exempt in Spain; However, some Agreements establish tax power for Spain under certain circumstances (for the duration of the stay, for the amount of income...).

  • Artistic and sporting activities: As a general rule, income from actions carried out in Spanish territory can be taxed in Spain in accordance with its internal law. However, there are special circumstances in various Agreements with respect to this type of income.

Taxation

Regulations: articles 24, 25 and 26 IRNR Law and articles 5 and 6 of the IRNR Regulation

When, in accordance with internal regulations and, where applicable, the Convention, the income from economic activities carried out without the mediation of a permanent establishment can be taxed in Spain, they will be taxed at the general tax rate in force. :

  • Residents EU , Iceland, Norway and, since 07-11-2021, Liechtenstein: 19%
  • Rest of taxpayers: 24%

In general, the tax base will be the difference between the total income and the expenses of personnel, supplies of materials incorporated into the works or jobs, and supplies.

In the case of taxpayers residing in another Member State of the European Union or in a State of the European Economic Area in which there is an effective exchange of information (with effect from July 11, 2021, the regulatory references made to States with which that there is an effective exchange of tax information are understood to be carried out in States with which there are regulations on mutual assistance regarding the exchange of tax information in the terms provided for in Law 58/2003, of December 17, General Tax, which is of application. See Annex V ), to determine the tax base, the following expenses may be deducted:

  1. In the case of natural persons, the expenses provided for in the Personal Income Tax Law, provided that the taxpayer proves that they are directly related to the income obtained in Spain and that they have a direct and inseparable economic link with the activity carried out. in Spain.

  2. In the case of entities, the deductible expenses in accordance with the provisions of the Corporate Tax Law, provided that the taxpayer proves that they are directly related to the income obtained in Spain and that they have a direct and inseparable economic link with the activity carried out in Spain. Spain.

The tax base corresponding to the income derived from reinsurance operations will be constituted by the amounts of the premiums transferred, in reinsurance, to the non-resident reinsurer. These income are taxed at a special tax rate of 1.5%.

Deductions : Only the following may be deducted from the tax rate:

  • Deductions for donations, in the terms provided in the Personal Income Tax Law and in the Law on the tax regime of non-profit entities and tax incentives for patronage.

  • Tax withholdings that have been applied on the taxpayer's income.