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V0132-14 22 January 2014 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · establecimiento permanente

Different permanent establishments possible in same country if activities are distinguishable and separately managed

A company asked whether each oil extraction operation in which it participates via associations or consortia in the same country constitutes a separate permanent establishment. The DGT responded that this is possible if each activity is clearly distinguishable and has separate management enabling it to operate independently.

The question raised

In relation to the application of Article 22 (exemption of certain income obtained abroad through a permanent establishment) of the recast text of the Corporate Income Tax Law, and assuming compliance with all the requirements established therein, it is consulted whether when the same entity has several oil operations in a foreign country (through holdings in different associations or consortia), each one of them constitutes a different permanent establishment.

The DGT's ruling

An entity may have several permanent establishments in the same country if there are facilities or workplaces that carry out clearly distinguishable activities. To this end, each activity must have separate management that allows the activity to be carried out by itself as an essential component. In the case of oil consortia, the existence of independent accounting, personnel, and differentiated legal regimes allows each operation to be considered a distinct permanent establishment.

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