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Our previous publications did conclude that foreign corporations operating through permanent establishments abroad or in Spain, do entail certain tax obligations. Does this mean that operating without a permanent establishment (performing the main activities of the company without being a representative office) exempts from these obligations? There are certain tax differences when operating with or without a permanent establishment. General Tax Directorate has recently issued a binding ruling, dated August 2019. It analyses a particular case of non-resident company acting in Spain for certain operations. It does so from the perspective of Non-Resident Income Tax, Personal Income Tax on hired workers and VAT. This consultation clearly evidences various differences in taxation. It further shows formal differences depending on the tax authority’s decision to consider the entity as a Permanent Establishment of the respective country, or not. This post reviews the earlier mentioned eventual differences that could basically occur. Conclusions will depend on the Double Taxation Agreement applicable to each case, moreover the issue will be subject to the type of income. Tax differences when operating with or without a permanent establishment NON-RESIDENT INCOME TAX A non-resident company operating in Spain will be taxed according to business profits obtained in Spain: With permanent establishment: The agreement will mostly state that it is taxed in Spain. Without a permanent establishment: The agreement will mostly state that no tax is payable in Spain. WITHHOLDING OF TAX APPLICABLE TO INCOME IN CASE OF HIRING WORKERS IN SPAIN In those cases where the company needs to hire workers for execution of its activity in Spain, the obligation to retain (or not) income tax by the contracting non-resident company depends on the following scenarios: With permanent establishment: The agreement will mostly indicate that the company will be obliged to withhold tax from yield incomes. Without a permanent establishment: The agreement will mostly state that the company will be obliged to withhold tax from yield incomes. VALUE ADDED TAX (VAT) If the activity carried out is subject to Value Added Tax in accordance with VAT law, and under the assumption that it is deemed to be provided within the territory of application of the tax under that same law, then the recipient of the sale of goods or services provided by the non-resident company (Spanish company, individuals, another non-resident company with or without a permanent establishment...) must be taken into account: With permanent establishment: This topic will not apply. Without permanent establishment: This topic will not apply. Conclusion Subsequently, if we are going to start or carry out activities in a foreign country, then two preliminary issues must be defined. This also applies in Spain, if we are non-residents: Do we have a permanent establishment? Eventual tax implications, in those cases where the tax office in that country considers the opposite. These tax differences when operating with or without a permanent establishment raise questions. At Carrillo Asesores we can help you. Contact us for bespoke attention to your case.

Our previous post reported about the possibility to reduce tax risk when expanding our business to foreign countries via: representative offices. If we have decided to work in a certain territory, then we should consider the full scope of suitable alternatives. The same thought is applicable in case we are a foreign company that has decided to work in Spain. Following option, in order of less complexity and perhaps tax risk, describes a structure of permanent establishment. What is a permanent establishment? This structure, which is defined on the Tax Agency’s website, has no legal personality. This implies: Less costs of incorporation. No responsibility of its own, as it is then absorbed by the "mother" company. Common sense applies; if there are workplaces, then acting through a permanent establishment will be the case; also in those circumstances, where the main activity of the company is executed in another territory. This will not be the case, if auxiliary activities of a representative office are being performed. This scenario is then monitored by double taxation agreements signed between Spain and other countries. Tax obligations of a permanent establishment Being of no legal personality does not mean exemption from certain obligations. The request for a TAX ID at the relative Tax Authority, the liquidation of the non-resident tax for profits, those corresponding to its workers regarding the Social Security of each country... The benefits obtained by permanent establishments will be taxed in the country of the parent company. "Double taxation" may be eliminated, depending on mechanisms existing between countries (if non-resident taxes have been paid in the country where the permanent establishment operates, those taxes may be deducted from the corporate tax of the "parent" company, with certain limits and requirements). In fact, these limits and requirements are one of the issues that should be analysed before operating with a permanent establishment. Of course, the facility to deduct these amounts is not at "sole discretion", but performances may be optimized. Carrillo Asesores will be delighted to support you in establishing yourself in any country, worldwide by means of studying the specific features of your business. We will also be pleased to assist in case your Company is a part of a foreign entity that wants to establish in Spain.

In which Spanish autonomous region should a tax on donation apply to a non-resident? A recent binding consultation of the General Directorate for Taxation has clarified, where a donation - made in form of cash from a parent to a child who is not resident in Spain - should become effective. This liability is regulated by the donations and inheritance tax system. Nowadays this kind of situations are quite common. Spanish citizens who have moved abroad to work, the parents donate a property, the money is obtained from sale, or inherited by succession. This scenario uses to raise doubts as far as receivers are working abroad, either being residents of the UE or not… tax liabilities are not clear. The case of a donation to a non-resident A married couple living in Madrid in 2014 sold a property they owned in the autonomous community of Castilla-la Mancha. Within a year of sale, the couple wished to donate the money obtained from that sale to their daughter. The daughter does not live in Spain and she further does not have her tax residence in Spain, but in Denmark. What does the legislation say? The Corporative Income Tax Law states, in accordance with the provisions of the European Community Court of Justice 3-9-14, case c-127/12: movable properties located in Spain, acquired by donation or other legal transactions free of charge and “intervivo”, assigned to taxpayers who are not resident in Spanish territory, but who are based in another state of the European Union or within the European Economic area, do have the right to apply to regulations of the autonomous community where the bespoke assets have been located for a greater number of days in the period of five years immediately preceding. Period counts from date to date, ending on the day before the tax accrued (Corporative Income Tax add. disp. 2. one. e). What should be taken into account? Donation is made by Madrid residents. Donation is in favour of a donor with tax residence in Denmark. Object of the donation is money from the sale of a property located in Castilla-la Mancha. The sale was executed less than a year ago. However, is it compulsory for the money to be in the hands of the donors for a number of days within the aforementioned period of foregoing five years? Moreover, is the lapse of period unnecessary. It is considered that the money was generated at the time of the sale of the property and, therefore, the regional regulations of Madrid apply from that moment onwards? What does the Ministry of Finance say? The Authority dictates that the calculation achievable to determine where a certain movable property (the money) has been over a period of five years prior to accrual, should only be taken into account when the movable property has been owned for a period of five years or more, but not when it has been owned for a period of less than five years. In fact, the Corporate Income Tax does not require possession for a certain minimum period on purpose of applying the above additional provision, moreover not every transaction of movable property must have, as its sole claim, a mere tax advantage. Illustrative example If you live in Spain by the year 2016 and you want to sell and donate the money to your child living in England, you will need to consider the following: If it is a property. You will be taxed in the autonomous community where the property is located. If it is money. You have to clarify where such cash was generated - or the taxable event that generated such income - and you will be taxed in that autonomous community. Knowing in advance that there are autonomous communities where the taxation is lower than others is crucial. In Murcia currently there is a 99% tax credit for donations from parents to children and/or wives or descendants, which represents advantages on these donative transactions to-date. Conclusion In those cases when the movable property being the object of the donation has been owned by the donor for a period of less than five years, the calculation to be made in order to know where the movable property has been for a greater number of days within bespoke period is compulsory. Therefore, determining the regulations of the autonomous community applicable, in relation to the period referred to in Corporative Income Tax Laws, disp. 2, must be understood as referring to the period in which the donor was the owner of said property (and not the five-year period). Subsequently, knowing the autonomous community regulations that do apply to the donation of money, and determining the period in which the said property has been in the possession of the donor, is crucial. Contact us freely for any additional information!

Performing activities abroad (or in case of being a non-resident company in Spain), may be considered as operating through a Permanent Establishment (“PE”) on tax purposes. However, determining if achievement of activity is really made in form of Permanent Establishment is not always easy. Performing a business in a territory other than that of non-residence, even when it is done presentially, is not a condition as such for being categorized as a Permanent Establishment. In addition to domestic legislation, Permanent Establishments mirror to international double taxation treaties. However, these definitions may not be perfectly adapted to our particular case in the way set out in the conventions. In addition, grammatical aspects can play tricks on the adjective "permanent": Can a temporary activity, carried out in a country where one is not a resident, be considered a Permanent Establishment? Fact is that the convention may issue statements, such as the following. "For the purposes of this Convention, the definition 'permanent establishment' means a fixed place of business through which a company carries on all - or part - of its activity". In accordance with the Agreement stipulated by the Organization for Economic Co-operation and Development, several conditions can be distinguished here: Business location; that is, facility, premises... Fixed; a place established with a certain permanence. Activities performed in that fixed business place. Permanent establishment for seasonal and/or temporary activities In those cases of temporary activity, it seems that the term "fixed" may be the one "breaking" the conditions necessary to be considered a Permanent Establishment. However, the comments clearly state: although countries usually adhere to the dictum that an activity will not be temporary if it exceeds six months in duration, it is possible that the very nature of the business requires that it can only be carried out in a short period of time. Subsequently, there are exceptions to this rule. These should be determined with other criteria (recurrence in time of the activity, if the company carries out similar activities in its country of residence...) Therefore, when doing business in other countries different to our tax residence, especially when this is performed physically, we recommend to review if the Tax Office of that country can categorize our entity as a Permanent Establishment and require compliance with their tax obligations. Even if the activities are temporary and/or seasonal. Are you doing business in other countries? Contact us. Our International Department will be glad to assist you.

The establishment of groups of companies through holding structures or any other type of facility, whether they are international groups or groups of resident companies, frequently raises doubts regarding what price to invoice from one company to another, and what transfer prices to apply. Commercial transactions between companies must respect the principle of free and full competition, independently to being a group or related company selling goods or services at a lower price than the market price. Which transfer prices to apply on holding company structures Performing incorrect transactions may well lead to adjustments by the Administration in this regard; transfer prices of these operations should be established accurately, in documentary terms. To this end, the Spanish Tax Agency issued a notification dated February 21st, 2021 in order to clarify issues related to these transfer prices. It refers to both, the OECD guidelines for transfer prices and the report on the Use of Comparability in the EU. The notification discloses the processes for a correct determination of the values or ranges of values that would comply with the arm's length principle. It makes special emphasis on the use of statistical tools and indicators where appropriate. This is important as it describes the methods used by the administration to correctly determine these transfer prices. This way, the company knows in advance what value or range of values the administration can give it for these transactions in the event of verification. Knowing the "enemy's" cards certainly makes it easier to play the game. Specifically and literally, the notification states: "In short, if the conditions of the related transaction are in range, the administration will not regularise and if they are not, then the transaction will have to be adjusted". Groups of companies or multinational entities It is very significant that the Tax Agency ends the notification with an example between a resident company and its non-resident related entity. This problem is explicitly relevant for groups of companies or multinational entities. Once the valuation method for related-party transactions has been chosen, which may be common to many countries, the comparability chosen do not necessarily have to be the same or even similar. For example, the operating profits on sales of a sector in one country may be very different from those of the same sector in another. In fact, this is where the taxpayer will have to demonstrate that both, its method and its chosen values are duly justified, so that the existence of compliance-type documents before carrying out the operations, duly justified and documented, becomes particularly relevant to avoid subsequent adjustments. Contact us to resolve any questions in this regard. Our Holding Department and International Tax Law Department will be happy to assist you.

If you are a sportsperson or an artist performing abroad, then you may have to pay tax in more than one country for the income obtained. If you are a non-resident sportsman, sportswoman or an artist in Spain with income generated here, you may have to pay tax in Spain. Basically, this taxation simply means that the national payer withholds the correct amount as non-resident income… that's it; Subsequently, those mechanisms fixed to avoid double taxation described in the corresponding double taxation agreement, will offset this withholding against the tax in the respective country of residence. Calculating withholding taxes of non-resident artists and athletes However, in too many cases this aspect is not included in the agreements made between artist and promoter; this may have unpleasant consequences in terms of taxation. The relevancy of this issue is hereafter viewed by an example: "Let’s suppose there is an agreement between a singer “X” resident in a foreign country and a Spanish promoter who wants to engage “X” for performance of a concert in Spain. It is mutually agreed that an advance payment of 5.000 euros being the artist's fee, with issuance of the relative invoice, will be executed. According to the double taxation agreement between Spain and that foreign country, a withholding tax of 19% must be levied on income from artists' work performed in Spain by a non-resident". In this case, the correct withholding tax would be 950 euros (5.000 euros gross plus 19%), so the receivable amount by the artist would be 4.050 euros, while 950 euros would be paid to the tax department, as withholding tax. However, in those cases where the terms are not correctly disclosed, and the artist is credited with the full amount of 5.000 euros, then the tax department may assume that these 5.000 euros are the net amount and raise this amount to gross, as taxable income for the withholding tax. In other words: If the aforesaid 5.000 euros are assumed to be net, then the gross amount would be: Under this assumption, the taxpayer (the Spanish promoter is obliged to draw the withholding) is the one to prove that the withholding was actually 950 euros and not 1.172,84 euros, with the subsequent cost that this entails (penalties, surcharges, fees for managing the claim...). As far is this example is concerned, the amounts may be irrelevant, but imagine the scenario by fixing higher values. The damage could be more than significant! Therefore, when contracting with non-resident artists, there are two issues that must be taken into account: Review the withholdings applicable to the engagement, thoroughly. Incorporate these aspects in contracts and invoices.

A certainly unknown facility is a representative office. It allows expansion of business to foreign markets, yet taking advantage of low fiscal risks. In this global world, it gets more and more common to strive for business abroad. Sometimes this is even essential for business growth. At the same time, foreign companies are frequently looking for business in Spain, too. There are several options for a Company to perform business abroad. Of course, the first target to achieve is to source for business before launching it. Although we are living in a digital world, it is convenient to explore new challenges “at sight”. The costs arising in this context may be one of the first handicaps a SMEs has to face, when it comes to expand to foreign markets. As a matter of facts, besides basic exports transactions (simply selling our product from our own country), it seems risky to set-up a branch or permanent establishment or even a subsidiary company, abroad. This is not just due to the relative establishment costs, but also tax liabilities issued by the Authorities of the foreign country may be of concern. What is a representative office? It is an abroad entity established by the non-resident company to develop auxiliary activities (advertising, commercial actions...). Appointment of representative will be compulsory, while no sales are achievable. This entity will enable penetration to new markets, at minimum tax risks. The representative office does not have legal personality, it does not carry out taxes and it does not present annual accounts. Furthermore, the procedures for its implementation are far easier and less expensive than any permanent establishment or subsidiary branch. Issuance of a public document reporting about the conditions of opening, declaring the representative ... (while there is no obligation to file this document in the Registry), may be of convenience. Foreign companies that want to establish in Spain may be subject to presentation of certain analogous documents provided with the Apostille of the Hague or similar; particularly when workers are employed. Representative offices are a simple, fast possibility that avoid unnecessary risks. However, a clear guidance on operative is essential; otherwise Tax authorities of certain countries may consider the representative office as a permanent establishment. Double taxation agreement A thorough review of the double taxation agreement between Spain and subject country to explore the conditions under which a part of our business can adjust to a permanent establishment in another country, is essential to avoid unexpected headaches. If you are considering opening new markets through this feature and in case you need advice, contact us. Our staff at Carrillo Asesores will be pleased to assist you.

The global COVID-19 pandemic has dramatically accelerated remote working, particularly for certain branches. It seems clear that it is a trend that will remain, even after pandemic situation. In fact, legislation is already adapting to that method. Working from home has certain advantages (but also disadvantages). Mainly reducing travel time to zero, which can be very attractive in large cities and/or for certain jobs. It may even allow not having to live in the same country as before, but continue performing the same job, same category, for the same company. This already implies an international tax issue. Mainly because the worker's country of residence may not coincide with the country where the job is performed. That's why today, we will talk about international taxation of home workers. How would International taxation of home workers work? The main topic is to determine the tax residence. Also, if applicable, to apply for the corresponding double taxation agreement. This agreement, if available, will give us a clear criteria regarding where the remote worker is considered resident. This aspect can raise disputes. Particularly, in the first year of adopting this method, as it is a period focusing on more than one country of effective residence. Once the country of residence for tax purposes is clear, then it will be necessary to determine whether, depending on the type of income received from work (self-employed, employed, professional work, civil servants, diplomats, etc.), the legislation of the country and the corresponding agreement oblige to pay tax in one territory or another. This may be as a resident or non-resident. Moreover, the methods described in the agreement itself to avoid double taxation must be applied. State of alarm and travel restrictions represent further issues. As the taxpayer may be forced to pay tax as a resident where he or she did not intend to stay. Binding consultation V1983-20 This happened, for example, to the Lebanese couple in the binding consultation V1983-20, in addition to the fact that Lebanon does not currently have a double taxation agreement with Spain). All this may result in prejudice for a double taxation. This may happen in those cases where the taxpayer’s country of origin also considers him or her a resident by virtue of its own laws. Therefore, if as a taxpayer you intend to perform home work from another country, it is recommended to have a clear insight about taxation. Moreover, if, as a company, you are going to have a remote worker performing in another country, you may be required to pay withholding taxes in that country. International taxation spreads different criteria on each particular case. We should analyse carefully the methods applicable. We at Carrillo Asesores International Department will be delighted to clarify the doubts you have with regard to your specific case.

Topics about non-resident income and its obligation to report have already been disclosed with our previous posts. The key issue here is to determine the tax residence, in which territory the taxpayer (individual or company) is considered to be a tax resident. Doubts may arise when economic interests are performed in more than one country and income is obtained or assets are held. Tax residence criteria Although article 9 of Personal Income Tax Law 35/2006 defines the criteria for being considered a tax resident in Spain, it may happen that the other state, where the taxpayer has earned income or has assets, also considers the taxpayer to be a tax resident. In fact, this circumstance quite common. Although it is true that spending more than half of the year in a country is usually a residence criteria, in Spain there is another treatment, which states that the taxpayer for whom the main core or base of his activities or economic interests, either directly or indirectly, is located in Spain, will be a tax resident. Certainly, the domestic legislation of other countries also do apply criteria that may, at some point, mirror to a paradox statement declaring that a taxpayer may be considered tax resident in both territories. Now, if this is the case, how to proceed? Double taxation agreement In this case, it will be necessary to refer to the double taxation agreement between Spain and the corresponding state. Review of the residence criteria is compulsory. Normally the treaty offers different "tie-breaking criteria", in order of preference. At least, it is normally indicated that the authorities of both states will decide by mutual agreement, but fixing an agreement before it comes to this point uses to be the most common method. It is important to remark that being a non-resident, but choosing to be taxed as a resident in one country, if applicable, for some income in another, may imply that the taxpayer will be considered a resident by both countries' tax authorities. Evidencing that he/she is a resident in the other country will be compulsory Each individual case may be completely different from the other: different countries, different income, different personal circumstances... Tax queries due to residency issues need to have a clear, solid and documentary proved method applicable to the country, in which the taxpayer will be tax resident. Reversals of being considered a tax resident in one territory rather than another and the relative withdrawals can have serious consequences in quantitative terms. For example, in Spain the general non-resident rate is currently 19% for taxpayers from other EU countries. If later controls performed by the tax office determine the taxpayer to be a resident, the maximum marginal rate depends on the autonomous regions, but percentage applicable can be around 50% and therefore, parallel liquidations of a significant amount (plus interest and taxes) can be levied.

Internet sales (or sales at distance) are different from the popular e-commerce. This is because you do not sell an online service, but goods, just like traditional methods or offline commerce. Goods sold over the Internet are practically identical to what is sold by telephone or fax. That is, since the Internet is still a catalyst for orders, the trade or sale of goods over the Internet is fiscally similar to "distance sales of goods" . For VAT on internet sales purposes, transaction is regulated by Article 68.3,4 and 5 of the VAT Law. One of the main problems in taxing economic activity over the Internet is determining where the transaction takes place. The general rule is to consider the place where the server is located by reference. This can be different from the country hosting the website or from which the products are sent. Sometimes this situation can generate doubts about the place of taxation and, therefore, about which Administration should levy. In this case we assume that the place of taxation is located in Spain. This is because the company is physically in Spain. In other words, the server is Spanish. How does VAT on Internet sales tax, depending on the end consumer? 1.- When the buyer is another company: When the buyer is a business resident in Spain. In this case the sale is subject to VAT. When the business buyer does not reside in Spain, but does reside within the European Union. In this case the sale is not subject to VAT. The recipient company must account for VAT in its country. When the business purchaser resides in a country outside the European Union. In this case the sale is not subject to VAT. The recipient company must account for VAT in its own country. 2.- When the purchaser is the final consumer: Transportation is not carried out by or on behalf of the purchaser. The receiver is not a VAT payer but a private individual In the event that we are dealing with a distance sale, the operative will be subject to Spanish VAT. For this reason, the corresponding rate must be included in the invoice. Location rules for Internet sales to individuals Internet sales to Spanish customers Effect of 21% VAT charge. In the case of a private customer, it is not necessary to issue an invoice, a ticket is sufficient. "For operatives carried out by those who are not entrepreneurs or professionals acting as such, it will not be obligatory to include the recipient's identification details on the invoice for transactions whose counter-party is less than 100 euros, excluding Value Added Tax" Art. 6 of the Regulation governing invoicing obligations. Internet sales to Community customers The location rules for this type of delivery of goods are set out in Article 68.4 of the VAT Law, and they do have the following requirements: The supply of goods, the dispatch or transportation starting in the territory of application of the tax shall not be classified as being carried out within the territory of application of the tax where the conditions referred to in points 1, 2 and 3 of the preceding paragraph are met and where the total value of the goods, excluding tax, exceeded the limits stipulated for that purpose in the previous calendar year in that State. The provisions of this paragraph shall in any case apply to supplies carried out during the current year as soon as the amount exceeds the quantitative limits established by the respective Member States of destination. Entrepreneurs whose sales to other Member States have not exceeded the above limits may choose to apply the provisions of this paragraph in the form laid down by regulation. The option shall cover at least two calendar years. Nevertheless, the earlier mentioned supplies of goods shall not be classified as being carried out within the territory of application of the tax when the goods are subject to excise duty. Cases when the general rule does not apply Therefore, the general rule is taxation at source, i.e. in Spain with Spanish VAT. But there are still some cases where the general rule does not apply: The general rule does not apply when sales to the same country exceed the limits established by European regulations for each Member State (for example, for Belgium 35,000 euros), in which case it will be taxed at destination. The general rule does not apply when the seller chooses to pay tax at destination. The limits for each member country of the EEC are as follows: Taxation in the other country will be compulsory in those cases, where the above-mentioned sales threshold is exceeded in each country. It will become effective at the moment when the threshold is exceeded. VAT equivalent to a commercial transfer must be recorded when the threshold previously detailed for each country is reached. Once the value exceeds the threshold in the Member State, the supplier is obliged to register in the Member State and settle the VAT, according to Article 68. Three, of the VAT Law will be from the moment that this limit is exceeded. Registry in the consequent EEC country and settle the VAT of the destination country for the sales made, without ending the financial year, might be the case. If the threshold is not exceeded, the supplier can apply VAT according to the Member State, but it is then possible to pay tax in the other Member States of the European Union, even if the aforementioned threshold or limit has not been exceeded. Therefore, until the end of the year, businesses selling products to private individuals in other EU countries can opt for the distance selling scheme for the following two years. The earlier mentioned scheme is therefore compulsory, i.e. when a company established in Spain supplies products to private individuals (final consumers) located in another European Union country, it must charge them Spanish VAT (there is generally no exemption) [LIVA, Art. 25], unless it exceeds the limits per country set out in the figure above. Optional Scheme However, the optional scheme means that, even if your business does not exceed the limit for a given country, you may choose to benefit from this scheme and charge VAT in that territory. To do so, submit a form 036 in December and tick boxes 901 and 902, specifying the country concerned. In this case, you must apply the system for two years (after this period, the option will be understood to have been revoked, unless you apply for it again) [LIVA, Art. 68.4; Order EHA/1274/2007, Art. 11.2.e]. It should be noted that the voluntary option for the distance selling scheme may be interesting. This happens when the VAT rate in the country of destination is lower than the Spanish rate. For example, in the case of Germany, which has a VAT rate of 19%. Also when you plan to exceed the threshold in the near future (in which case the scheme will be compulsory) and you wish to avoid having to give explanations to customers for the change in rates. Internet sales to non-EU customers These will be treated as exports irrespective of where they are made and the amount of sales to each territory. These transactions are exempt from VAT. Sales made by a Spanish company to a foreign individual (non-resident in the EU), whether via the Internet or not, as they are goods, are exempt under Article 21 of VAT Law 37/1992. This article states: The following operations shall be exempt from the tax, under the conditions and with the requirements established by regulation: The supply of goods dispatched or transported outside the Community by the transferor or by a third party acting in the name and on behalf of the transferor. … The above exemption will be subject to compliance with the requirements set out in Article 9 of the Value Added Tax Regulations, approved by Royal Decree 1624/1992, of 29 December, which approves the Value Added Tax Regulations. Exemptions relating to exports or shipments outside the Community shall be subject to compliance with the requirements set out below: Supplies of goods exported or sent by the transferor or by a third party acting in the name and on behalf of the transferor. In these cases the exemption will be conditional on the actual departure of the goods from the territory of the Community, where this is provided for by customs legislation. For the purposes of justifying the application of the exemption, the transferor must keep at the disposal of the authorities, for the period of limitation of the tax, copies of invoices, contracts or order slips, transport documents, documents proving the departure of the goods and other evidence of the transaction. … In this case it would be essential that the Seller keeps a copy of the SAD of each export. The SAD is the Customs Document proving the exit of the goods. Conclusions of VAT on Internet sales In those cases where the buyer is a businessperson, the sale will be taxed in the country of destination. On the other hand, if the buyer is a private individual, the sale will be taxed at origin, except when sales to the same EU country exceed the thresholds established by European regulations, in which case it will be taxed at destination. And remember that you can also voluntarily choose to be taxed at destination on distance sales. If you have any questions or comments to add, please leave them below.

It was issued in 2008, but with a last amendment in November 2015, the Rules for Mutual Agreement Procedures in the field of direct taxation have been in force. This concept of Mutual Agreement Procedures (MAP, Mutual Agreement Procedure) may sound familiar to us if we are familiar with double taxation agreements as there is usually an article in them that talks about them and establishes certain rules and deadlines to be followed (the agreements that follow the OECD model). Mutual agreement procedure mechanism characteristics This mutual agreement procedure mechanism, as it is provided in the double taxation conventions (there are other mutual agreement procedures regulated by the European Arbitration Convention, which, although they have some common aspects with which we are referring, are somewhat different), has some noteworthy characteristics: It is not at all incompatible with the economic-administrative route. In other words, the taxpayer can go to court and at the same time request a friendly procedure (which will often be resolved “de facto”) It is possible that the procedure will end without resolution. No judge or court is obliged to give a favourable ruling in whole or in part to one of the parties. The taxpayer has to apply for this in the country where he is resident under the agreement, whether the proceedings are to be initiated by the administration of the state where he is resident or by the administration of the other state to which the case relates. In Spain, it will be presented to the Tax Office or the Directorate General of Taxes depending on the case. There is no specified time limit to resolve. Reasons for a mutual agreement refuse If the mutual agreement procedure is applied in Spain, the taxpayer, who must provide all the necessary documentation duly required by the administration, must take into account that he may be refused to initiate the mutual agreement procedure for various reasons. Submitting the request is not always synonymous with the fact that the case will be reviewed (e.g. because of problems with deadlines, lack of documentation, not being a problem with the agreement, etc.): Voluntary withdrawal by the taxpayer Termination by agreement not to eliminate double taxation or non-conforming taxation. Termination by agreement to eliminate double taxation or inconsistent taxation. These mutual agreement procedures can help in certain cases and given their compatibility with the judicial system, it may be interesting to request one (normally it is a period of three years from the occurrence of the event that gives rise to the double taxation dispute). If you have doubts about your case and need an opinion on the convenience of presenting a mutual agreement procedure, or if you have already decided on it and want to go ahead with the application, do not hesitate to contact us. Our International Department will be glad to help you.

Reference is made to our previous posts related to problems that may raise whilst declaration of income in different countries. Depending on the characteristics of the activity, this problem can be especially harsh for artists and actors when undertaking performances abroad. In fact, all countries want to get “a share of the cake”. Eradicating problems is essential for having a clear guideline of how to work correctly beforehand. Thus avoid unpleasant surprises, at a later time. Keys to international taxation of Spanish artists and actors Thinking about a scenario comprising an international tour with concerts or performances in different countries… where is the artist or actor, who is considered a Spanish resident for tax purposes, expected to pay taxes? (please refer to the residence criteria). When a resident of one country obtains income in other countries, the preliminary factor to be taken into account is the Double Taxation Agreement between those two territories; it is crucial to study the place of taxation of said income, according to the type of income obtained. Under the assumption that it is concluded that such income should be taxed in the territory where one is not a tax resident, then the correct way to proceed (either by means of a Non-Resident Tax return from that country, or directly with a withholding on the invoice...) must be determined. In case of independent professionals and with regard to Personal Income Tax (IRPF in Spain) within the country of our residence is concerned, this can rebate up to the limit allowed by the Convention, thus avoiding paying taxes twice for the same concept. Example of how an artist based in Spain pays international taxes Say, an actress living in Spain executes performance in another country, for which she will be paid 1,000 euros. According to the agreement between Spain and that other country, the income must be taxable in the country where the performance is executed (in this case, the foreign country). Therefore, under the assumption that a withholding of non-residents for that concept in that country is 14%, the correct compliance would be retaining 140 euros to the actress’s invoice, and to provide her with a relative certificate. Subsequently, the actress's Spanish personal income tax return, with the necessary documentation in her hands, will indicate an income of 1,000 euros, which will result in an amount payable, from which those 140 euro retained and executed in the foreign country can be compensated (we assume that the legislation allows the entire amount to be compensated). Therefore, when planning an international tour or performance, we recommend to have an adequate tax planning, it will prevent economic harms for tax adjustments abroad. Moreover, it will minimize the tax burden in the country where one is resident by paying taxes twice for the same concept. Are you an artist, contact us. Please follow this link and we will contact you as soon as possible.