General Rule
The taxable income corresponding to the income which entities taxed by effective obligation obtain without the intermediation of a permanent establishment will be based on the gross amount accrued.
Specialities
Services
Provision of services, technical assistance, installation or assembly works derived from engineering contracts and, in general, economic activities carried out in Spain without the intermediation of a permanent establishment, in order to determine the taxable income, the costs of personnel and supplies of materials, will be deductible under the statutorily determined conditions.
Reinsurance Operations
For income derived from reinsurance operations, taxable income will be based on the amounts of the premiums transferred for reinsurance, to the nonresident reinsurer.
Capital Gains
Taxable income will be determined by the difference between the transfer value of the asset in question and its corrected acquisition value by applying the monetary decline coefficient.
When the capital gain arise from an acquisition without a consideration, the amount thereof will be the normal market value of the item acquired.
Loss Carry-Forward
The rules on off-setting losses will not be applicable to entities which are not resident in Spanish territory and which obtain income therein without the intermediation of a permanent establishment.
Tax Liability
Tax Rates
NONRESIDENT INCOME TAX RATE Revenues or Earnings in general 25% Capital Gains 35% Sea or air navigation entities resident abroad whose ships or aircraft touch Spanish territory 4% Reinsurance Operations 1.5%
In the case of transfers of real estate located in Spain by nonresident taxpayers which act without a permanent establishment, the acquirer will be obliged to withhold and pay in 5 per cent, or to make the corresponding payment on account, of the agreed consideration, as a payment on account of the tax corresponding to the nonresident, unless, in principle, the real estate was acquired more than 10 years before December 31, 1996, when no improvements have been made to it during this time or the real estate is contributed to the capital stock of a resident entity.
If the aforementioned withholding tax or payment on account is not paid in, the assets transferred will be assigned to payment of the tax.
TAX DEDUCTIONS
Only taxes withheld and payments on account effected on the income of the taxpayer may be deducted from the tax due.
Formal Obligations
Obligation to file a return for this tax are:
- In general, after one month has elapsed from the tax accrual.
- After three months have elapsed from the tax accrual for capital gains.
The jointly and severally liable parties may also file the return and settle the tax liability.
In general, they are not obliged to meet the accounting, registration or formal obligations established for this tax.
Taxpayers who obtain income from providing services, technical assistance, installation or assembly works derived from engineering contracts and, in general, business activities carried out in Spain without the intermediation of a permanent establishment will be obliged to keep the corresponding records of income and expenses.
When taxes must be withheld, taxpayers will be obliged to register in the Index of Entities and keep income and expense records.
Taxpayers will be obliged to withhold taxes and make payments on account related to the earned income they receive and other income subject to the withholding tax. The latter constitute deductible expenses for income derived from providing services, technical assistance, installation or assembly works derived from engineering contracts and, in general, economic activities carried out in Spain without the intermediation of a permanent establishment.
Supletory Rules
In regard to any issue which is not expressly regulated, the rules contained in the general regime will be applicable.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
For further information contact Florentino Carreno on +341 524 7100
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