Non-resident taxes with permanent establishment in Spain

It may happen that, although a natural or legal person does not have a domicile in Spain, they have an activity that requires a permanent establishment to carry it out. In these cases, taxes are applied to non-residents with a permanent establishment, which have similarities with respect to the application of taxes to companies domiciled in Spanish territory.

What is meant by permanent establishment

Natural and legal persons who do not have their habitual residence in Spain may or may not have a permanent establishment in Spanish territory.

It is considered that a natural person or an entity has a permanent establishment in Spain in the following cases:

facilities or workplaces in Spanish territory where all or part of the activity is carried out on a continuous and regular basis.
When you regularly act in Spain through an authorized agent that you hire in the name and on behalf of a non-resident person or entity.

In addition to these situations, in any case, permanent establishments are considered to be management headquarters, branches, offices, factories, workshops, warehouses, shops and other establishments, mines, gas or oil wells, quarries, agricultural, forestry or livestock and construction or installation works when their duration exceeds six months.

Taxes for non-residents with permanent establishment

Natural and legal persons with a permanent establishment have formal and fiscal obligations to comply with, similar to companies with residence in Spain.

Obligations of permanent establishments

Permanent establishments are regulated by the Corporate Tax withholding regime for the income they receive. This means that they are obliged to make installment payments on account of the liquidity of said tax in the same terms as another entity residing in Spain.

In addition, they are also obliged to make withholdings and deposits on account in a similar way to what entities residing in Spanish territory do.

In addition to tax obligations, permanent establishments must also comply with some formal obligations:

Obligation to present a declaration where the corresponding tax debt is determined and entered. This will be done using model 200 or 201 within the 25 calendar days that follow six months after the end of the tax period.
Keep the accounting correctly and separate the operations that are carried out and the patrimonial elements that are affected by said movements.
They are obliged to comply with the rest of the accounting, registry or formal obligations that are required of entities that are considered to be residents of Spanish territory according to the Corporate Tax regulations.

Attributable income and tax calculation

To calculate the tax, only what is called attributable income is used, which is the income received and that is included in any of the following assumptions:

The yields of the economic activities or exploitations that are carried out in the permanent establishment.
All the patrimonial yields that are obtained from patrimonial elements assigned to said establishment.
The capital gains and losses derived from patrimonial elements that are attached to the permanent establishment.

Taking these situations into account, the tax base will always be determined in accordance with the provisions that are applied by general regime in the Corporation Tax.

The tax rate established in article 29 of Law 27/2014, on Corporation Tax, will be applied to the tax base obtained. The general tax rate for taxpayers of this Tax will be 25 percent, except for entities whose net turnover of the immediately preceding tax period is less than 1 million euros, which will be 23 percent.

When the income obtained by permanent establishments of non-resident entities is transferred abroad, except for entities with tax residence in States of the European Union and countries with an agreement with Spain to avoid double taxation provided there is reciprocal treatment, a complementary tax will be required, at a rate of 19%, on the amounts transferred charged to the income of the permanent establishment.

The tax period will coincide with the fiscal year declared by the permanent establishment, without being able to exceed 12 months. When a different one has not been declared, the tax period will be understood as referring to the calendar year. The tax will accrue on the last day of the tax period.

The communication of the tax period must be formulated at the moment in which the first declaration for this tax must be presented. Taxes on non-residents with a permanent establishment will be applied in cases where the natural or legal person has establishments where the economic activity is carried out or when they act in Spain through an authorized agent. In these situations, they will be obliged to make the corresponding withholdings and make the installment payments of Corporation Tax, using only the attributable income.

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