Permanent establishment

Nonresident taxation in Spain varies substantially according to whether a permanent establishment exists in Spain or not
When a nonresident has available in Spain, under any title, facilities or places of work of any kind in which he usually runs all or some of his business, or when he acts in Spain through an authorized agent with the power to contract on behalf of the nonresident or organization, he is deemed to be a nonresident acting through a permanent establishment.

What is considered permanent establishment ? section 13

An individual or organization operates through a permanent establishment when they have available in Spain:

1º Head office, branch offices, offices, factories, workshops, warehouses, shops or other establishments, mines oil or gas wells, quarries, farming, forestry, livestock operations or any other place, of exploration or extraction of natural resources.

2º Construction, installation or assembly works whose, duration exceeds six months.

Taxable bands, rate of tax, tax period, allowances and reliefs due date and supplementary taxation section 16
Taxpayers getting income through a permanent establishment in Spain will pay the tax on the total income assigned to that establishment, regardless of where the income is obtained. Attributable income may infer from the economic activities or operations undertaken by this permanent establishment, from assets that are part of the permanent establishment and from capital gains or losses deducted from integrated elements (those linked functionally to the undertaking of the activity). Assets that are separated from the permanent establishment and transmitted will be considered taxable during the three tax periods following the severance.
Stocks shall only be deemed to be integrated when the permanent establishment is a branch office registered in the Spanish Companies House, the assets are accounted for in the books of the permanent establishment and, being a permanent establishment which may be regarded as a parent organization, the permanent establishment has set up an appropriate organization of material resources and personnel in order to direct and manage these shares.

Taxable band
The taxable band of the permanent establishment is determined in accordance with the provisions of the General Corporate Income
Tax Real Decreto Legislativo 4/2004, including the carry forward of net operating losses (fifteen years), with the following special provisions:
• Application of the arm’s length principle for related parties operations performed by the permanent establishment with the head office or with another permanent establishment of the same organization, and with other individuals or companies bound to the head office or its permanent establishments, either located in Spain or abroad.
• Payments from the permanent establishment to the head office as fees, interest, commissions, technical assistance, services and for the use or assignment of assets or rights can not be considered deductible expenses
• Partial deductibility is allowed for general administration and management expenses imputed by the head office to the permanent
establishment, as long as they are accounted for in the books of the permanent establishment and are imputed continually and rationally. To identify these expenses, taxpayers are entitled to submit proposals to the Tax Administration to obtain an advanced valuation of the portion of management and general administration expenses that will be deductible.

Tax rate

Deductions and credits
Permanent establishments can apply the same alowances and credits as general Corporate Income Tax payers to their net tax liability.
Tax period and due date
The tax period coincides with the financial year for which the tax return is filed, not to exceed twelve months. The tax is due on the
last day of the taxable period.
Permanent establishments are obliged to comply with the same formal, registrar and accounting obligations that are required of resident organizations.
Supplementary taxation
When permanent establishments of nonresident entities (not of individuals) transfer income abroad, a supplementary tax of 18% (15% until January 1, 2007) will be due on the amounts transferred.
Nevertheless, this tax will not be applicable to permanent establishments whose head office is a resident of another Member State of
the EU, provided that is not a resident of a country or territory labeled as a 'tax haven', nor to permanent establishment whose head office is resident of a State that has signed an agreement to avoid double taxation with Spain in which no other arrangements are expressly provided, on condition of reciprocity.
The supplementary tax must be filed on Form 210 within one month from the date the income is transferred abroad.

Tax withheld and payments on account of in-kind income
Permanent establishments are subject to the same regime of tax withholding at the source as corporations and entities subject to
Corporate Income Tax.

Estimated Tax
Permanent establishments are obliged to make advance payments of estimated tax on account of their yearly tax liability under the
same conditions as entities subject to Corporate Income Tax. The formal obligations relating to estimated tax are:
• Deadlines:
First 20 calendar days of the months of April, October and December.
• Forms:
- Generally, Form 202 When no tax is due under the rules of estimated tax, it is not mandatory to file Form 202.
- Large Business, Form 218 In this case, the Form must be submitted even when no estimated tax is due.
• Where to file for estimated tax:
- Form 202
The filing and payment of Form 202 may be made with any of the collaborative tax collecting organizations (most banks, savings banks or credit cooperatives) locate in Spain.

Tax return
Permanent establishments must file yearly a Tax return using the same Forms and within in the same deadlines as resident organizations subject to Corporate Tax.
• Deadline:
25 calendar days following the 6 months after the conclusion of the tax period.
• Forms:
200 (simplified) or 201 (ordinary)
• Where to file:
Simplified tax return: Form 201 The place of filing depends on the result of the tax return

Ordinary tax return: Form 200 This Form must be filed electronically.