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V0702-15 3 March 2015 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · establecimiento permanente

Requirements for tax exemption of a foreign permanent establishment

A Spanish company with property in the UK asks whether it can apply the exemption method for rental income there. The DGT examines whether foreign real estate activity constitutes a permanent establishment and an entrepreneurial activity.

The question raised

1. Whether the consulting entity can apply the exemption method in the fiscal year spanning from April 6, 2012, to April 5, 2013, as it is the first fiscal year in which the requirements to have opted for said exemption method are met.

The DGT's ruling

To apply the exemption under Article 22 of the TRLIS, the income must derive from business activities abroad. In the case of real estate leasing, it is considered an economic activity if there is an exclusive premises for management and at least one employee under a full-time employment contract. Furthermore, the permanent establishment must have been taxed by a tax of an identical or analogous nature and must not be located in a tax haven.

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