Doctrine by topic · DGT Observatory

Business Profits: DGT doctrinal evolution

How the DGT's position on this topic has evolved, and the rulings it rests on.

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How the DGT's position has evolved

Settled doctrine High confidence 20 rulings · 2014–2024

Current position

Business profits are only taxed in the State of residence of the company, unless the activity is carried out through a permanent establishment in the State where the income is generated. In the case of technological or software services, if there is no transfer of intellectual property, the payment is classified as business profits under Article 7 of the Convention and not as a royalty. If there is a principal service, its classification determines the treatment of complementary services.

The DGT's position remains constant in the application of Article 7 of the OECD Model Convention to avoid the taxation of business profits in the absence of a permanent establishment. The doctrine has maintained the distinction between business profits and royalties, especially in technological services. No changes in criterion are observed, but rather a repeated application of the rule in different scenarios involving services and intellectual property.

Turning points

  1. V1532-14

    Establishes that payment for software is not a royalty if the intellectual property is transferred, classifying it as business profits.

  2. V1824-24

    Specifies that the use of standard software for connection is a business profit and that the classification of the principal service governs complementary services.

Analysis based on 18 of 20 rulings with a stated position. Updated 25 September 2026.

Rulings on this topic

20
V2604-14 6 Oct 2014

Online course fees in India may be treated as royalties

SG de Impuestos sobre las Personas Jurídicas
cánonesbeneficios empresarialesestablecimiento permanentenación más favorecidaservicios prestados por vía electrónica TRLISLIVA — Ley 37/1992 del IVA art. 20.Uno.9º
Affects CompanyExpat · Non-residentIndividual
V2175-14 6 Aug 2014

German KG profits may be taxed in Spain as foreign establishment earnings

SG de Impuestos sobre las Personas Jurídicas
entidad en régimen de atribución de rentasestablecimiento permanenteexención de rentas obtenidas en el extranjerobeneficios empresarialestransparencia fiscal TRLIS — RDLeg 4/2004 (derogado por la Ley 27/2014) art. 21.1TRLIS — RDLeg 4/2004 (derogado por la Ley 27/2014) art. 22
Affects CompanyExpat · Non-residentIndividual

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