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

The two traditional criteria whereby income can be considered to have been obtained on 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 derived from economic activity.

   • Income from economic activities or holdings carried out through a permanent establishment located in Spanish territory.

   • Earnings from economic activities or holdings obtained without permanent establishment means when:

     • Activities carried out on 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 foregoing, those earnings settled as a result of the international purchase/sale of goods, including incidental expenses and mediation commissions, are not considered earnings obtained in Spain.

     • In the case of the provision of services used on 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.

     • They are derived from the personal action on 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 other similar benefits.

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

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

4. Remuneration of directors and members of the Board of Directors, of the Meetings that they do as their own or representative bodies.

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

5. Earnings from movable capital.

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

   • Interest and other earnings obtained from the transfer to third parties of equity capital settled by persons or organisations resident in Spain or by permanent establishments located therein or which repay capital loans used in Spain.

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

6. Earnings from real estate (real estate assets).

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

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

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

8. Capital gains.

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

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

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

   • When assets located on Spanish territory or rights that must be fulfilled or exercised on Spanish territory are incorporated into the taxpayers assets, even when not derived from a previous transfer, such as net gains from gambling activities.

Exemption applicable to any type of income: Income is not considered to be earned in Spain when it is paid to non-resident persons or organisations by permanent establishments located abroad, at their own expense, when the corresponding services rendered are directly linked to the activity of the permanent establishment abroad.