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V1564-20 25 May 2020 · SG de Fiscalidad Internacional Criterion in force
IRNR · establecimiento permanente

No retention of IRNR if Swiss entity has no permanent establishment in Spain

A Swiss company providing medical training in Spain is queried on IRNR retention. The DGT states that if no permanent establishment exists, income is taxed only in Switzerland and is exempt in Spain.

The question raised

1. Whether the operation is subject to Non-Resident Income Tax (IRNR) withholding and, if applicable, the applicable rate.

The DGT's ruling

Income from training activities of a Swiss entity is taxed exclusively in Switzerland pursuant to the Convention, unless the entity has a permanent establishment in Spain. The existence of a permanent establishment depends on whether the activity has a fixed place of business and a degree of permanence, which is typically not the case if the activity lasts less than six months, unless there is recurrence or a specific nature of the business. If the exemption under the Convention is applied, no withholding tax shall be applied, and the entity must prove its tax residence with a certificate from the Swiss authorities.

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