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Non-Resident Taxation Guide (February 2023)

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

Internal regulations

Regulations:article 13.1.b) Law IRNR

In accordance with domestic legislation, income from economic activities carried out without the intermediary of a permanent establishment located in Spanish territory is deemed to be obtained in Spanish territory in the following cases:

  • When the economic activity is carried out in Spanish territory.

    However, income derived from the installation or assembly of machinery or installations from abroad will not be considered as income obtained in Spanish territory when such operations are carried out by the supplier and their amount does not exceed 20% of the purchase price;nor those arising from the international buying and selling of goods, including additional expenses and brokerage fees.

  • When income is from providing services in Spanish territory.When these provisions of services partially support economic activities performed in Spanish territory, earnings considered to have been obtained in Spain will only be those supporting the activity performed in Spain.

  • When income derives from the personal performance of artists and sports people in Spanish territory, even when they are received by a different person or organisation.

Agreement

Where a double taxation convention is applicable, as a general rule and without prejudice to the particularities contained in the different conventions, the treatment given by most of them to income from economic activities or holdings obtained without the intermediary of a permanent establishment is as follows:

  • Company profits:Normally, company profits obtained without permanent establishment can only be subject to taxation in the taxpayer's country of residence and are exempt in Spain, due to the application of the agreement.

  • Professional activities:In general, as in the previous case, the Agreements attribute the authority to levy taxes on this income, obtained without a fixed base in Spanish territory, to the country in which the taxpayer is resident, and they are exempt in Spain;However, some Conventions establish taxing powers for Spain under certain circumstances (for the duration of the stay, for the amount of the income, etc.).

  • Artistic and Sports activities:As a general rule, income for performances carried out in Spanish territory can be taxed in Spain in application of its domestic law.However, there are special circumstances in various Agreements with respect to this type of income.

Taxation

Regulations:articles 24, 25 and 26 of the Non-Resident Income Tax Law and articles 5 and 6 of the Non-Resident Income Tax Regulation.

When, in accordance with domestic legislation and, where applicable, the Convention, income from economic activities carried out without the intermediary of a permanent establishment may be subject to taxation in Spain, it will be taxed at the general tax rate in force:

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

In general, the taxable base will be the difference between the full income and the costs of personnel, supplies of materials incorporated into the works or works and supplies.

In the case of taxpayers resident 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 11 July 2021, the regulatory references made to States with which there is an effective exchange of tax information are understood to be made to States with which there are regulations on mutual assistance in the exchange of tax information under the terms provided in Law 58/2003, of 17 December, General Taxation, which is applicable.See Annex V), the following expenses may be deducted for the determination of the tax base:

  1. In the case of individuals, the expenses provided for in the Personal Income Tax Act, provided that the taxpayer can prove 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, deductible expenses in accordance with the provisions of the Corporate Income Tax Act, provided that the taxpayer can prove 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.

The tax base corresponding to the income derived from reinsurance operations shall consist of the amounts of premiums ceded, under reinsurance, to the non-resident reinsurer.This income is taxed at a special rate of 1.5%.

Deductions:of the tax liability may only be deducted:

  • Deductions for donations, under the terms set out in the Law of IRPF and in the Law on the tax regime for non-profit organisations and tax incentives for patronage.

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