Professionals residing in Argentina will not be taxed in Spain if they provide services from their home country

The taxing power over income obtained by professionals residing abroad depends strictly on the physical location where the activity is carried out. Recently, the Dirección General de Tributos (DGT) has specified the scope of the Convention between Spain and Argentina for the avoidance of double taxation regarding professional services.

What the DGT has resolved

The ruling analyzes the situation of an independent professional with tax residence in Argentina who provides services to a Spanish entity. According to the administration's criteria, Article 14 of the Spanish-Argentine Convention allows Spain to tax this income with a 10% limit only if the activity is carried out within Spanish territory.

However, the DGT determines that if the professional performs their activity entirely from Argentina and does not have a fixed base in Spain, the Spanish State does not have the power to tax such income. In this scenario, the taxing competence falls exclusively to the professional's State of residence.

What this means for you

This criterion has direct implications for both the professional and the contracting entity in Spain:

• For the professional residing in Argentina: If they do not have a fixed base in Spain and carry out their activity from their country of residence, their income will not be subject to Non-Resident Income Tax (IRNR) in Spain.
• For the Spanish company: The company contracting these services should not apply withholdings in Spain, provided it can be proven that the service is provided entirely from Argentina and that the professional has no physical presence or fixed base in Spanish territory.

What should be done

To avoid contingencies with the Tax Administration, it is necessary to correctly document the nature of the service provision. The absence of a fixed base must be demonstrable, ensuring that the activity is not physically carried out in Spain. It is recommended to assess each contractual situation to confirm that the requirements of the Double Taxation Convention are met and to ensure the correct tax treatment in the invoice and the contracting company's accounting.