Acting Through A Permanent Establishment
Tax will be levied on all income imputed to the establishment, regardless of the source from which it was obtained or produced in accordance with the rules established in the Law.
Acting Without A Permanent Establishment
Tax will be levied on each total or partial accrual of income subject to taxation.
In particular, accrual will be understood:
- In the case of income from working, when it is paid or on the date of collection, if earlier.
- In the case of income from capital gains, when the change in the equity takes place.
- In the case of income from real estate for individuals personal use, the last day of the year.
GENERAL RULE
Income of:
- Individual entrepreneurs or professionals resident in Spanish territory.
- Legal persons or entities resident in said territory.
- Permanent establishments located in Spanish territory.
Exception:
- Those which are derived from business activities other than those mentioned in the paragraph below, when they are fully performed abroad. In particular, this paragraph will be considered to include income derived from international purchases/sales of goods, including commissions for intermediation therein and other related ancillary expenses.
- Those derived from providing a service, such as studies, projects, technical assistance, management support and professional services, when such services or assistance are fully performed outside Spanish territory and are directly related to business or professional activities of the payer carried on abroad, unless they refer to items located in Spanish territory. Services for business or professional activities carried out in Spanish territory or which refer to items located therein will be understood to be used in Spanish territory.
- Those which are paid to nonresident entities by permanent establishments located abroad and charged thereto, when the corresponding services are directly related to the activity of the permanent establishment abroad.
BUSINESS ACTIVITIES
Income from business activities carried out through a permanent establishment located in Spanish territory.
The income of economic operations performed in Spanish territory without the intermediation of a permanent establishment therein. Notwithstanding, income derived from the installation or assembly of machinery or installations imported into Spanish territory will not be considered to be obtained or produced in Spanish territory when the installation or assembly is performed by the supplier of the machinery or installations and when the cost thereof does not exceed 20 per cent of the acquisition price of the items imported.
Income derived from providing service, such as studies, projects, technical assistance, management support and other professional services, when the service is performed or used in Spanish territory.
Services which serve business or professional activities carried out in Spanish territory or which refer to items located therein will be understood to be used in Spanish territory.
Income directly or indirectly derived from personal performances in Spanish territory by artists and athletes, or of any other activity related with such performance, which are attributed to entities.
INCOME FROM CAPITAL
Dividends and other income derived from interests in the equity of entities resident in Spain.
Interest, royalties and other income from security investments paid by persons or entities resident in Spanish territory or by permanent establishments located therein, or which remunerate capital used in Spanish territory.
Income directly or indirectly derived from real estate located in Spanish territory or from rights relative thereto.
Capital gains derived from securities issued by persons or entities resident in Spanish territory.
Capital gains derived from real estate located in Spanish territory or from rights which must be complied with or exercised in said territory. In particular, this latter includes:
- Capital gains derived from rights or interests in an entity, resident or otherwise, the assets of which are mainly constituted by real estate located in Spanish territory.
- Capital gains derived from the transfer of rights or interests in an entity, resident or otherwise, which provide their owner with the right to enjoy real estate located in Spanish territory.
Capital gains derived from other non-fixed assets located in Spanish territory or from rights which must be complied with or exercised in such territory.
EXEMPTIONS
Income From Capital And Capital Gains
Interest and capital gains derived from non fixed assets obtained without the intermediation of a permanent establishment, by entities resident in another member state of the European Union.
The provisions of the preceding paragraph will not apply to capital gains derived from the transfer of shares, participations or other rights in an entity in the following cases:
- When the assets of such entity consist mainly, directly or indirectly, of real estate located in Spanish territory.
- When, at any time during the twelve months prior to the transfer, the taxpayer has held a direct or indirect interest of at least 25 per cent of the capital or equity of such entity.
- Obtained through a tax haven.
Interest and capital gains derived from Public Debt, obtained by nonresident entities without the intermediation of a permanent establishment in Spain. This is not applicable to interest or capital gains obtained through a tax haven.
Income from securities and capital gains derived from securities issued in Spain by non-resident natural or legal persons without the intermediation of a permanent establishment, regardless of the place of residence of the financial institutions which act as payment agents or as intermediaries in the issue or transfer of the securities. This is not applicable when the owner of the securities is a resident entity or a permanent establishment in Spain.
Income of "nonresident accounts", paid to nonresident entities in Spanish territory, unless the payment is made to a permanent establishment located in Spain by registered entities.
Income or capital gains obtained in Spanish territory, without the intermediation of a permanent establishment, from the rental, assignment or transfer of containers or of naked hull ships and aircraft, used for international sea or air navigation.
PARENT-SUBSIDIARY
Participation Requirements
Parent company holds a direct interest of at least 25 per cent in the capital of another company.
Interest must have been maintained without interruption during the year prior to the date on which the profit to be distributed becomes receivable.
Corporate Requirements
Both companies must be subject to and not exempt from one of the taxes on the profits of legal entities in the member states of the European Union mentioned in article 2.c) of Directive 90/435/EEC of the Council, of 23 July 1990, relative to the regime applicable to parent companies and subsidiaries of different member States.
The profit distribution may not be the consequence of the liquidation of the subsidiary.
Both companies must be registered on one of the forms provided for in the appendix to Directive 90/435/EEC of the Council, of 23 July 1990, relating to the regime applicable to parent companies and subsidiaries of different member States.
Residence
Residence will be determined in accordance with the legislation of the corresponding member state, without prejudice to the provisions of treaties for avoidance of double taxation.
Reciprocity Case
The Ministry of Economy and Finance may declare, provided there is reciprocity, that the contents of this letter are applicable to parent companies and subsidiaries which take a legal form other than those provided for in the Appendix to the Directive.
Anti-Abuse Measures And Tax Havens
Exemption will not be applicable when:
The majority of the voting rights in the parent company are held, directly or indirectly, by natural or legal persons which do not reside in member States of the European Union, except when the parent company effectively carries on a business activity carried out by the subsidiary or when its purpose is the supervision and management of the subsidiary by the appropriate organisation of material and human means, or when it proves that it was incorporated for valid business reasons, and not in order to unduly enjoy this regime.
The parent company has its tax residence in a tax haven.
Reciprocity cases
The Minister of Economy and Finance may declare, provided there is reciprocity, the exemption of income corresponding to sea or air navigation entities resident abroad, whose ships or aircraft touch Spanish territory, even if they have consignees or agents therein.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
For further information contact Florentino Carreno on +341 524 7100
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