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V3397-15 4 November 2015 · SG de Impuestos sobre el Consumo Criterion in force
IVA · establecimiento permanente

Branches of German entities may constitute permanent establishments if they possess their own resources and permanence

A query was raised regarding whether branches of German chemical companies constitute permanent establishments of their parent companies and how their management services are taxed. The DGT determines that branches may be permanent establishments of the German entities if they have their own human and technical resources, but they do not constitute permanent establishments of the parent company if they maintain independence and autonomy.

The question raised

Question raised 1. Consideration of branches as a permanent establishment of the German entities upon which they depend and, where applicable, of the parent entity.

The DGT's ruling

For a branch to constitute a permanent establishment, it must possess an adequate structure of human and technical resources with a sufficient degree of permanence. If the branches maintain independence and autonomy in their organization, they are not considered a permanent establishment of the parent entity. Management services provided by the German entities to their parent company are not subject to VAT in Spain, as they are understood to be performed outside the territory of application of the tax.

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