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V0156-21 2 February 2021 · SG de Fiscalidad Internacional Criterion in force
IRNR · establecimiento permanente

Whether a premises in Spain constitutes a permanent establishment depends on whether its storage and display function is auxiliary

A professional seeking residency in Andorra asks whether their premises in Barcelona, used for storage and product display, constitutes a permanent establishment. The DGT responds that no permanent establishment exists if the activity in the premises is strictly auxiliary and preparatory.

The question raised

Question posed: It is asked where the economic activity should be taxed in accordance with the Convention for the Avoidance of Double Taxation between Spain and Andorra due to the relocation, assuming the person is a tax resident in Andorra, and assuming that the premises in Barcelona are maintained solely for the purpose of storage and product display.

The DGT's ruling

If the premises in Spain are used solely for the storage and display of goods, and management, sales, and invoicing are carried out from Andorra without concluding orders in Spain, no permanent establishment exists. In that case, business profits are taxed exclusively in the State of residence (Andorra). If activities are carried out that are not merely auxiliary or preparatory, such as contacting clients for sales, a permanent establishment would exist in Spain.

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