Skip to content
Back to index
V1408-15 5 May 2015 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · establecimiento permanente

Joint ventures may establish separate permanent establishments

The DGT confirms that construction consortia abroad may be considered independent permanent establishments if they carry out distinct activities under separate management, and must apply the exemption regime under Article 22 of the LIS.

The question raised

Question raised 1. It is posed whether each of the consortia could be considered a separate permanent establishment, provided that each of them has adequate separate management, such that it may be possible to carry out the activity on its own. And whether for those consortia that have requested the exemption from the Ministry of Finance pursuant to Article 50.2 of the recast text of the Corporate Income Tax Law, the tax regime established for income obtained by temporary joint ventures operating abroad is applicable.

The DGT's ruling

It is possible to operate through different permanent establishments in the same country if clearly distinguishable activities are carried out and they have separate management that allows the activity to be performed on its own. Entities participating in collaboration formulas analogous to temporary joint ventures may benefit from the exemption of positive income obtained abroad if they meet the requirements of Article 22 of the LIS. In the event that several permanent establishments exist, they are considered in isolation for the application of the rule. If the transfer or cessation of the activity of a permanent establishment occurs, the resulting positive income shall be exempt, whereas negative income shall be integrated into the taxable base, reducing the previously exempt net positive income.

Free assessment and quote