To discuss the taxation of foreign companies, we have to start by distinguishing between what is considered a foreign company and what is not.
CONCEPT OF RESIDENCE IN SPAIN for paying taxes
In order to distinguish the different situations that we will discuss, it is necessary to take into account the definition of residence established by law.
According to article 9 of the Royal Legislative Decree 3/2004, it is understood that Spanish residents, for taxation purposes, are individuals and entities:
- Those who stay more than 183 days during the calendar year in Spanish territory.
- Those whose main nucleus or base of their activities is located in Spain.
NON-RESIDENT COMPANIES IN SPAIN and taxes
These are companies that are not domiciled in Spain but have some kind of link with the territory.
In this case, the payment of taxes will be focused on the taxation of income obtained in Spanish territory, paying the tax called TAX ON INCOME OF NON-RESIDENTS (IRNR), and therefore the Royal Legislative Decree 5/2004 will be applicable to them.
In this case, there are two possible situations:
- If the company has a permanent establishment in Spain: In this case it will be taxed for each total or partial accrual obtained in Spanish territory that is subject to the tax and the taxation will be, normally 24%, according to what is established in article 13, 18 and following of the Royal Legislative Decree 5/2004.
- If the company does not have a permanent establishment in Spain, in this case it will be taxed on a single full amount obtained in the tax period and the taxation will normally be 30%, articles 24 and following of Royal Legislative Decree 5/2004.
It must be taken into account at this point that Spain has many double taxation agreements to avoid double taxation and thus promote foreign investment.
* It is highly advisable for foreign companies to have a representative, either an individual or a legal entity, to represent them before the Tax Administration, in some cases established in articles 10, 24.2 and 38 of the Royal Legislative Decree 5/2004, there is a legal obligation to have one.
taxes for NON-RESIDENT COMPANIES THAT are ALSO NOT receiving any INCOME FROM SPAIN
With the modality of teleworking, more and more implemented in the society, new situations have appeared that generate questions to the companies. The doubts that appear in this respect are basically 2:
- I have a worker in Spain, does my company have to pay taxes?
No, the fact that your company has a worker in Spain does not oblige you to pay taxes in Spanish territory, this fact alone does not create an element of foreignness that binds the company.
- Does the employee have to pay taxes in Spain?
It depends on the time that he/she is in Spanish territory, if he/she is considered resident according to the established in article 9 of the Royal Legislative Decree 3/2004, he/she has to pay taxes.
- In case the worker does not pay taxes, am I committing any infraction as a company?
No, the problem will be for the worker, there is not what is called stranger link in international law, for this reason the company does not have any obligation in this respect and it is not committing an infraction, which the worker could be committing according to article 52 paragraph c of the organic law 4/2020.
If you have any doubts or need advice on taxation in Spain and you want advice from a law firm with more than 20 years of experience in the sector, contact Conesa legal.