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V3336-14 15 December 2014 · SG de Fiscalidad Internacional Criterion in force
IRNR · establecimiento permanente

German resident's property rental in Spain may constitute economic activity

A German resident asks whether renting properties in Spain through an agent constitutes a permanent establishment and how taxation applies. The DGT responds that it will only be considered economic activity if there is a dedicated premises for management and at least one employee on a labour contract.

The question raised

Two questions are raised:

The DGT's ruling

The leasing of real estate by a non-resident only constitutes a permanent establishment if it is carried out as an economic activity, which requires having an exclusive premises for management and at least one employee under a full-time employment contract. If it is an economic activity, it is taxed under IRNR via permanent establishment (Form 200) with the obligation to maintain separate accounting. If it is not an economic activity, it is taxed as income from real estate (Form 210) and, being a resident in the EU, may deduct related expenses.

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