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Non-Resident Taxation Manual (July 2024)

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

Internal regulations

Regulations: Article 13.1.b) Law IRNR

According to internal regulations, the income from economic activities carried out without the mediation of a permanent establishment located in Spanish territory is understood to be obtained in Spanish territory, in the following cases:

  • When economic activities are carried out in Spanish territory.

    However, income derived from the installation or assembly of machinery or facilities from abroad will not be considered 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 paid for international sales of goods, including accessory costs and brokerage fees.

  • When it comes to services provided in 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.

  • When they derive, directly or indirectly, from the personal performance in Spanish territory of artists and athletes, even when they are received by a different person or entity.

Agreement

When a double taxation agreement is applicable, as a general rule and without prejudice to the specific features contained in the various agreements, the treatment that most of them give to the income from economic activities or operations obtained without the mediation of a permanent establishment is the following:

  • Business Benefits: Normally, business profits obtained without the mediation of a permanent establishment can only be subject to taxation in the country of residence of the taxpayer, being exempt in Spain under the application of the Convention.

  • Professional activities: In general, as in the previous case, the Agreements only attribute the tax power to tax these incomes, obtained without a fixed base in Spanish territory, to the country in which the taxpayer resides, being exempt in Spain; However, some Conventions establish tax authority for Spain under certain circumstances (due to the duration of the stay, the amount of income, etc.).

  • Artistic and sports activities: As a general rule, income from activities carried out in Spanish territory may be taxed in Spain in accordance with its internal 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 IRNR Law and Articles 5 and 6 of the IRNR Regulation

When, in accordance with internal regulations and, where applicable, the Convention, the income from economic activities carried out without the mediation of a permanent establishment can be subject to taxation in Spain, they will be taxed at the general tax rate in force:

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

In general, the taxable base will be the difference between the gross income and the expenses of personnel, supply of materials incorporated into the works or jobs 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 July 11, 2021, 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 matters of exchange of tax information in the terms provided for in Law 58/2003, of December 17, General Tax Law, which is applicable. See Annex V ), the following expenses may be deducted to determine the tax base:

  1. In the case of individuals, the expenses provided for in the Personal Income Tax Law, provided that the taxpayer proves 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 Tax Law, provided that the taxpayer proves 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 taxable base corresponding to the income derived from reinsurance operations will consist of the amounts of the premiums ceded, in reinsurance, to the non-resident reinsurer. These returns are taxed at a special rate of 1.5%.

Deductions : Only the following may be deducted from the tax rate:

  • Deductions for donations, under the terms provided for in the Income Law and in the Law on the tax regime of non-profit entities and tax incentives for patronage.

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