Income obtained in Spain:subject to Income Tax for Non-Residents

The two traditional criteria whereby income can be considered to have been obtained in Spanish territory are the criteria of territoriality and payment.Nevertheless, in accordance with the legislation in effect since 1 January 2003, the payment criteria is only applicable with respect to the income for which it is expressly established.The following are the different connection points exposed according to the type of obtained income.

1. Earnings from economic activities.

   • Income from economic activities or operations carried out via permanent establishment located in Spain.

   • Earnings from economic activities or operations, obtained not via permanent establishment when it is:

     • Activities carried out in Spanish territory, except for revenues from the installation or assembly of machinery or facilities coming from abroad, when these operations are performed by the supplier and their amount does not exceed 20% of the cost price.Notwithstanding the above, earnings are not considered to have been obtained in Spanish territory when they are obtained as payments in the international buying and selling of goods, including the expenses and commissions.

     • In the case of the provision of services used 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.

     • They are derived from the personal action in Spanish territory of artists and sports people, even when they are received by a different person or organisation.

2. Earnings from work.

   • In general, when they originate from work carried out in Spain (territoriality criterion).

   • Payment criterion:

     • Payments made with public funds by the Spanish Government.This criterion does not apply when the work is fully carried out abroad and these earnings are subject to foreign personal income tax.

     • Remuneration of employees of ships and aircraft in international traffic, paid by employers or organisations resident in Spain, or by permanent establishments located in Spanish territory.This criterion does not apply when the work is fully carried out abroad and these earnings are subject to foreign personal income tax.

3. Pensions and similar benefits.

   • When they are derived from employment provided in Spanish territory.

   • When they are paid by a resident person or organisation or by a permanent establishment situated in Spanish territory (payment criterion).

4. Remuneration of directors and members of Boards of Directors, of Boards performing their duties or of representative organisations.

   When they are paid by an organisation resident in Spanish territory (payment criterion).

5. Earnings from liquid capital.

   • Dividends and other earnings derived from participation in funds belonging to organisations resident in Spain.

   • Interest and other earnings obtained by assignment to others of own capital paid by resident individuals or organisations or by a permanent establishment situated in Spanish territory or repayments of loans of capital used in Spanish territory.

   • Fees paid by resident individuals or organisations or by permanent establishments located in Spanish territory or which are used in Spanish territory.

   • Other earnings from liquid capital not previously mentioned paid by individuals performing economic activities, in the exercise of their activities or organisations resident in Spanish territory or by permanent establishments situated in Spanish territory.

6. Earnings from real estate.

   Income derived, directly or indirectly, from real estate assets situated in Spanish territory or from rights relating to these assets (territoriality criterion).

7. Income imputed to individual taxpayers who are natural persons and titleholders of urban real estate not performing economic activities.

   Real estate assets located in Spanish territory (territoriality criterion).

8. Capital gains.

   • When they derive from securities issued by resident individuals or organisations.

   • When they are derived from other real estate assets located in Spanish territory.

   • When they come from real estate assets situated in Spanish territory.

   • When assets located in Spanish territory or rights to be performed or exercised in Spanish territory are incorporated into the taxpayer's assets, even if they do not derive from a previous transfer, such as gambling winnings.

Possible exemptions applicable to any type of income:Income paid to non-resident individuals or entities by permanent establishments located abroad and charged to them is not considered to have been obtained in Spanish territory when the corresponding benefits are directly linked to the activity of the permanent establishment abroad.