Skip to content
Back to index
V3717-16 5 September 2016 · SG de Fiscalidad Internacional Criterion in force
IRNR · establecimiento permanente

No IRNR withholding should be applied to Andorran companies without a permanent establishment in Spain

A local council has requested guidance on the procedure for contracting services from an Andorran company. The DGT has ruled that, under the relevant Double Taxation Convention, profits of Andorran companies are exempt from Non-Resident Income Tax (IRNR) in Spain unless they operate through a permanent establishment. The ruling also analyses the location of VAT based on the type of service provided.

The question raised

Following the entry into force of the Convention between the Kingdom of Spain and the Principality of Andorra for the avoidance of double taxation with respect to taxes on income and the prevention of tax evasion: What procedure must be followed at the time of receipt of the invoice? Is the procedure the same if the service provider is a natural person registered in the Andorran commercial register with a tax identification number or a legal entity?

The DGT's ruling

Regarding Non-Resident Income Tax (IRNR), the profits of an Andorran company are exempt from taxation in Spain if it does not carry out the activity through a permanent establishment. If there is no permanent establishment, no withholding tax should be applied, but the payer must submit a negative declaration (Form 216) and an annual summary (Form 296). Regarding VAT, if the service is located in Spain and is provided by a non-established entity, the City Council shall be the taxable person.

Book your free first meeting