RISKS OF A PERMANENT ESTABLISHMENT WITH EMPLOYEE IN SPAIN

A German enterprise may as well have an employee in Spain without the necessity of a legal structure (such as a subsidiary or a permanent establishment). However, it is essential to appoint a tax representative (such as the employee).

Notwithstanding the aforementioned, if a German enterprise maintains its business operations in Spain through a Spanish employee, the Spanish Tax Office may understand that this person is a dependent agent and that there is a permanent establishment in Spain. In this case, the profits achieved in Spain by the German enterprise would be taxed with a 25% Corporate Income Tax.

Therefore, it would be necessary to closely examine whether the functions performed by the said employee are complementary to the activities carried out in Germany (no permanent establishment) or whether that person acts in the name and on behalf of the Enterprise (permanent establishment).

Our tax advisors have plenty of experience in this field staying at your clients’ entire disposal for examining any similar structure they may pursuit.

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