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V1532-14 11 June 2014 · SG de Fiscalidad Internacional Criterion in force
IRNR · establecimiento permanente

No obligation to withhold IRNR on payments to regional centres for services used abroad

A Spanish company asked whether IRNR should be withheld on payments to regional centres and software providers for services in Latin America. The DGT states that if the services are used abroad, no tax is due in Spain.

The question raised

1. Treatment for the purposes of non-resident income tax (IRNR) withholdings of payments made by the Spanish taxpayer to Regional Centers for subcontracted services.

The DGT's ruling

For Regional Centers, services are considered to be used abroad when provided to subsidiaries outside of Spain, and therefore are not taxed in Spain. In the case of software providers, as the resulting intellectual property is transferred to the taxpayer, the payment is classified as business profits (Article 7) and not as a royalty, remaining exempt from taxation in Spain if they do not have a permanent establishment.

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