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V1587-14 18 June 2014 · SG de Fiscalidad Internacional Criterion in force
IRNR · establecimiento permanente

Opening a delegation in Spain may constitute a permanent establishment subject to IRNR, IAE and VAT

A Moroccan company asks whether opening a delegation in Spain constitutes a permanent establishment. The DGT states that if the delegation is a fixed business location or has a dependent agent, it will be considered a permanent establishment for Spanish taxation purposes.

The question raised

Consideration of the Delegation in Spain for the purposes of direct taxation in Spain.

The DGT's ruling

If the delegation is a fixed place of business where personnel carry out essential activities, or if there is an agent with powers to conclude contracts, there will be a permanent establishment. If the activities are merely preparatory or auxiliary, it shall not be considered a permanent establishment. In the event that a permanent establishment exists, the company shall be taxed for Non-Resident Income Tax (IRNR), Business Activities Tax (IAE), and shall be a taxable person for Value Added Tax (IVA).

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