A company is considered resident in Spain and is required to tax its worldwide income under Corporation Tax in the following cases:

1. Constitution in accordance with Spanish legislation: If the company has been incorporated in accordance with Spanish laws.
2. Registered office in Spain: If the company's registered office is in Spain.
3. “Effective” registered office in Spain: If the company's effective head office is in Spain. This “effective” registered office is defined as the place from which the company's business activities are directed and controlled.

In relation to companies established in countries or territories that do not apply taxes or that are considered tax havens, they are considered tax residents in Spain under the following conditions:

• Main asset in Spain: When the company's main asset, either directly or indirectly, consists of assets located in Spain or rights fulfilled or exercised in the country.
• Main activity in Spain: When the company's main activity is carried out in Spain.

However, this presumption can be refuted if the company demonstrates that its effective administration and direction occurs in the country or territory where it is established and that its constitution and operation respond to valid economic and business reasons, rather than simply managing securities or other assets.

Permanent Establishment (EP)

Taxpayers who operate in Spain through a permanent establishment (EP) are subject to the Non-Resident Income Tax (IRNR) regime.

Most Spanish tax agreements to avoid double taxation adopt a definition of EP in line with the criteria established by the Organization for Economic Cooperation and Development (OECD).

In the absence of an agreement to avoid double taxation, internal regulations define an EP as any work facility or place in Spain that is used continuously or regularly to carry out business or professional activities. This includes, but is not limited to, management offices, branches, offices, factories, workshops, warehouses, stores and other establishments. Mines, oil or gas wells, quarries, farms, forestry, livestock, or any other place where natural resources are extracted are also considered EPs. In addition, construction, installation or assembly works lasting more than six months are also classified as EP.

Spanish regulations do not include exceptions to the definition of EP for activities that are preparatory or auxiliary, unlike some double taxation agreements that can provide for such exceptions.

The Spanish Supreme Court has issued several rulings on the existence of permanent establishments, taking a functional approach. This has led to a flexible interpretation of what constitutes an EP, including a broad definition of the concepts of “dependent agent” and “permanent establishment”.