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V1594-14 20 June 2014 · SG de Fiscalidad Internacional Criterion in force
IRNR · establecimiento permanente

No permanent establishment for software and scanner installation in Spain

An Andorran company asks whether installing software and scanners at Spanish clients constitutes a permanent establishment and whether it must tax the licence fees. The DGT concludes there is no permanent establishment, but the use of equipment and software may generate taxable royalty income.

The question raised

Whether the consultant has a permanent establishment in Spain due to the installation of software and scanners at its Spanish clients; and whether it must be taxed in Spain for the assignment or transfer of the software/scanner.

The DGT's ruling

There is no permanent establishment because the equipment is installed under the direction and control of the client and the agents in Spain do not have the power to enter into contracts. However, the use or granting of use of rights over the software and industrial equipment constitutes a royalty subject to taxation in Spain. The applicable tax rate is 24.75% for the period between 2012 and 2014.

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