Non Resident Tax Spain Aeat?
- Víctormanuel Paz
1 Income obtained through a permanent establishment – Nonresident individuals or entities that obtain income through a permanent establishment located in Spain will be taxed on the total income attributable to said establishment, regardless of the place where it was obtained or produced.
- The concept of permanent establishment in Spanish law is in line with the OECD Model Tax Convention;
- In the case of a foreign entity or individual resident in a country with which Spain has a tax treaty, the treaty provisions and, specifically, the exceptions to the definition of permanent establishment, will determine whether there is a permanent establishment in Spain;
One fundamental characteristic of permanent establishments is the lack of legal personality separate from that of the parent. In other words, there are not two economic beings with separate legal personality—as is the case of a parent and a subsidiary—but rather one subject with a single legal personality that operates through different facilities, centers, offices, etc. According to Spanish legislation—applicable where there is not a tax treaty, otherwise that treaty would apply—a permanent establishment in Spain exists where the nonresident entity:
- Uses in Spain, under any legal arrangement, on a continuous or habitual basis, any kind of facilities or workplaces where it performs all or part of its activity.
- Acts in Spain through an agent that has and habitually exercises an authority to conclude contracts in the name and for the account of the taxpayer.
In particular, the following are deemed to constitute a permanent establishment:
- A place of management, branch, office, factory, warehouse, shop or other establishment.
- A mine, oil or gas well, quarry.
- Farming, forestry or fishing operations or any other place of extraction of natural resources.
- Construction, installation or assembly works lasting more than six months.
In general terms, permanent establishments in Spain are taxed on their net income at the same rate as Spanish companies (in general, at 25%). Nonresident entities or individuals operating through a permanent establishment in Spain are required to withhold taxes or make tax prepayments on the same terms as resident individuals or entities ( i. on salary income paid, income from movable capital satisfied, etc.
, one or more of which are located in Spain. However, if it is considered that the entity does not have a permanent establishment in Spain, it will be taxed on its income obtained in Spain pursuant to the regime for income obtained other than through a permanent establishment (See section 2.
2 of this chapter for more detailed information). There is a 19% tax (branch profit tax) on the remitted profits of nonresidents doing business through a permanent establishment in Spain. However, this tax is not chargeable according to the provisions of most of the tax treaties.
In addition, this tax is not chargeable on (i) the income obtained in Spain by entities that are tax resident in another EU Member State (unless it resides in a tax haven) or (ii) the income obtained in Spain through permanent establishments by entities resident for tax purposes in a State that has signed a tax treaty with Spain which does not expressly provide otherwise, provided that there is reciprocal treatment.
This tax will therefore be additional to that already borne by the permanent establishment on its income (25% on revenues net of expenses). Nonresidents who operate in Spain through a permanent establishment are generally required to keep accounting records here, in accordance with the rules and procedures established for Spanish companies. The taxation of the income of permanent establishments envisages three different situations, as follows:
- As a general rule, taxable income is determined in accordance with the same regulations as are applicable to Spanish-resident companies and, accordingly, the tax rate of 25% is applicable to net income. Allocated parent company general and administrative overhead expenses are deductible under certain conditions. The permanent establishment’s tax year will be the calendar year unless stated otherwise. The tax period is also deemed to have ended in the event of the discontinuation of a permanent establishment’s business activities, withdrawal of the investment initially made in the permanent establishment, or the change of residence of the head office.
- In the case of permanent establishments engaging in installation or erection projects with a duration of over 6 months, for those with seasonal or sporadic activity, or for those engaged in the exploration of natural resources, the tax base is determined in accordance with the rules applicable to nonresidents obtaining income in Spain not through a permanent establishment. Such rules also apply in determining the tax return filing and tax accrual obligations of the permanent establishment, which is not obliged to keep books of account (but only documentary support of its transactions). However, these nonresidents who operate through a permanent establishment in Spain may also choose to be taxed under the general rules, but such option may only be taken if separate accounts are kept in Spain.
- If the permanent establishment does not complete a business cycle in Spain which leads to income in Spain, and the business cycle is completed by the parent company (or the nonresident individual who operates in Spain through a permanent establishment) or by other permanent establishments, the tax liability is determined by applying the general taxation rules, whereby revenues and expenses are valued at market prices. However, the tax base will secondarily be determined by applying the percentage established by the Ministry of Finance for this purpose to the total expenses incurred, and by adding any “passive” (unearned) income not obtained in the normal course of business (interest, royalties, etc.
39 The permanent establishment may also take the tax credits and relief that might be applicable, in general, for Spanish resident companies. This choice must be made at the date of registration in the entities’ index.
) and any other capital gains arising from the assets assigned to the permanent establishment. This percentage has been set at 15%. The gross tax payable in this case is determined by applying the standard tax rate, but the tax credits and tax relief provided by the standard CIT system may not be taken.
- Lastly, there is an obligation to include in the tax base the difference between the normal market value and the book value of assets assigned to a permanent establishment that ceases its activity or which are transferred abroad. The payment of the tax debt resulting in the case of assets transferred to a Member State of the EU or of the EEA with which there is an effective tax information exchange will be deferred by the tax authorities at the taxpayer’s request until the assets in question are transferred to third parties, and the provisions of the General Taxation Law 58/2003, of December 17, and its implementing legislation shall apply with regard to the charge of late-payment interest and the provision of guarantees for that deferral. 40
What is an Aeat form in Spain?
The Spanish Tax Administration Agency (Spanish: Agencia Estatal de Administración Tributaria, AEAT), commonly known as Agencia Tributaria, is the revenue service of the Kingdom of Spain.