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V0659-20 2 April 2020 · SG de Impuestos sobre el Consumo Criterion in force
IVA · establecimiento permanente

Presence of a permanent establishment depends on having sufficient human and technical resources

A rental company asks whether a property outside Spain constitutes a permanent establishment and whether its income counts in the apportionment. The DGT states that mere ownership of a property is insufficient to establish a permanent establishment without own or subcontracted resources.

The question raised

Consideration of a property located outside the territory of application of the Tax as a permanent establishment in accordance with the Value Added Tax Law, as well as whether, for the purposes of calculating the general pro rata of the Tax, income derived from the lease thereof must be included.

The DGT's ruling

For a property located outside the territory of application to constitute a permanent establishment, it must possess an adequate structure of human and technical resources with a sufficient degree of permanence. If such a permanent establishment does not exist, lease income from outside the territory that would entitle a right to deduction shall be included in the calculation of the general pro rata. If a permanent establishment were to exist, its operations would not be included under the terms of the pro rata.

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