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Compulsory Representation for Non-Residents

People considered Non-Resident for Tax Purposes in Spain have two ways of obtaining some kind of revenue (income): either through a permanent establishment or without any permanent establishment being involved.

In the first case, with a permanent establishment[1], tax is paid on the entire revenue attributable to that establishment, regardless of the place where the revenue is obtained, making an annual tax return and offsetting transactions among the revenue generated, whether in positive or negative figures

For the case of not having a permanent establishment tax is paid separately for each time it is charged (each transaction) and subject to tax in Spain, whether fully or partially, and in this case no amounts can be offset between transactions.

So, when operating through a permanent establishment it is compulsory to appoint a representative. Below we list the types of representation existing in our General Taxation Act (hereinafter, LGT):

  1. Legal Representation.
  2. Voluntary Representation
  3. Tax Representation for a Non-Resident.

With regard to Legal Representation, Legal Representatives are considered to be persons acting on behalf of anyone unable to act for themselves; those holding office in the representative bodies of corporate entities (companies) i.e. their directors; and those representing entities with no legal status.

In this respect  a representative can be considered to be the person registered as such in a public registry (for example the Companies Registry); any renunciation or resignation has to be recorded in the Registry and any notifications made by the representative up until registration shall be valid. Therefore it is very important to communicate any modification and have it registered for that purpose.

Voluntary Representation is performed by anyone with the capacity to act and is demonstrated by any method admitted by Law; representation by way of standard documents approved by the Administration is valid, whether a simple proxy authorisation or a notarised power of attorney where this is required.

Representation is so important that when it is renounced, this must be done formally and reliably, that is to say the waiver will not take effect until it has been formally communicated to the taxpayer. This also happens with cancellation, for which documentary evidence has to be produced to the Administration and in no case will it entail the invalidation of any actions taken up until that time by the representative.

For this reason, to be the Tax Representative of a Non-Resident involves the greatest risk because, where permanent establishments and companies receiving revenue from abroad are concerned, the tax representative will be jointly and severally liable, i.e. obliged to pay any taxes corresponding to the taxpayer.  This means, no more and no less, that he will have to pay any taxes that are not paid by the person he is representing.

So how is representation to be relinquished or cancelled? For the Administration, the following methods are admitted:

  1. Reliable notification by burofax with acknowledgement of receipt and certification of content.
  2. Both parties appearing before a notary.
  3. Both parties appearing before the Administration.

The risk involved in being a representative is high, because it is possible that the principal is absent and therefore there is no possibility of communicating the renunciation; for this reason, appropriate caution should be taken when representing someone. But if we also consider the joint and several liability of the representative in certain cases, then the risk could become unrealistic.

Below we take a look at the cases in which it is obligatory to appoint a representative. Non-Residents (individuals and companies), are obliged to designate a representative in the following cases:

  1. When they operate through a permanent establishment.
  2. When they engage in business in Spain without a permanent establishment.
  3. When specifically required by the Tax Administration.
  4. And when individuals or companies resident in countries or territories with which there is no effective exchange of information (normally tax havens), are the owners of assets located in Spain.

The obligation to appoint a representative must be notified to the Administration within 2 months from the appointment and the person appointed must expressly accept it.

In companies, the failure to make this appointment will authorise the Tax Administration to consider the representative to be the person registered as such in the Companies Registry.

The representative, of course, must be an individual or a company that is resident in Spain; the failure to make this appointment, when it is compulsory, will result in a fine of 2,000 euros, that can reach 6,000 euros for residents in countries with which there is no effective exchange of information (normally tax havens).

Lastly, and very important, in addition to the tax representative, the payer of revenue received by non-resident taxpayers without a permanent establishment, and the custodian or manager of the assets allocated to a permanent establishment for the revenue for whose custody or management he is responsible, is also responsible for paying taxes, (although in some cases this will not be required if there is an obligation to make a withholding).

For example, supposing that a Non-Resident who owns a property in Spain that he rents as living accommodation to a couple having their tax residence in Spain, in this case the party obliged to withhold a certain monthly amount is the couple renting it, and they will be obliged to pay that withholding, even if they are unaware that the owner is a Non-Resident.

Therefore, we recommend going to tax lawyers who are expert on the subject, because a simple rental agreement, and many other transactions, can lead to a great many headaches.

[1] For the purposes of Non-Resident Income Tax, it is understood that a person operates through a permanent establishment in Spain when under any title he continuously or habitually owns any facilities or workplace of any kind in that establishment, in which he carries out all or part of his business, or acts therein through an agent authorised to enter into contracts on behalf of the non-resident, and who habitually exercises those powers.

The following are particularly considered to be permanent establishments: the seat of management, branches, offices, factories, workshops, warehouses, shops or other establishments, mines, oil or gas wells, quarries, agricultural, livestock, and forestry operations or those for the extraction of natural resources, and building, installation or assembly works lasting for more than 6 months.


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