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V3250-17 19 December 2017 · SG de Fiscalidad Internacional Criterion in force
IRNR · establecimiento permanente

Foreign entity must pay Spanish tax on attributable profits

A Northern Ireland company proposes to operate in Spain via a permanent establishment for importing and re-selling coal. The DGT determines that the entity must be taxed under the Income Tax on Non-Residents on profits attributable to the establishment and examines its VAT liability for operations.

The question raised

1. Must the permanent establishment file a Corporate Income Tax return in Spain for the operations carried out, taking into account the Spain-UK Convention?

The DGT's ruling

If the Northern Irish entity operates in Spain through a permanent establishment, Spain may tax the profits attributable to it in accordance with the Spain-UK Convention. The entity shall be considered a taxpayer of the Non-Resident Income Tax. Regarding VAT, sales in Spain shall be subject to the tax if a permanent establishment exists, whereas deliveries to Ireland shall be exempt if the intra-Community export requirements are met.

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