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Non-resident lessor of premises with no permanent establishment for VAT purposes

Controversial question: who must pay VAT on the rental of an establishment when the owner is a Non-Resident for tax purposes in Spain?

According to Article 4. One of Law 37/1992, of 28 December, on Value Added Tax (hereinafter, LIVA), “supplies of goods and services carried out within the spatial scope of the tax by businessmen or professionals for consideration, on a regular or occasional basis, in the course of their business or professional activity, even if they are carried out for the benefit of the partners, associates, members or participants of the entities that carry them out, are subject to the aforementioned tax“.

Concept of entrepreneur or professional

Article 5 of the LIVA defines for the purposes of this tax the concept of entrepreneur or professional, indicating that, in particular, lessors of goods shall be considered as such.

Leasing as provision of services

Article 11. Two of the LIVA states that the leasing of goods, industry or business, companies or commercial establishments, with or without an option to purchase, will be considered as the provision of services.

 Non-resident landlord and premises in Spain

All lessors of premises have for VAT purposes the status of businessperson or professional and the leasing of premises located in Spanish territory must be classified as a supply of services subject to VAT, in accordance with the provisions of Article 70.1.1.a) of the LIVA (Special rules for locating the supply of services), which states that:

One. The following services shall be deemed to be provided in the territory of application of the Tax:

1.º Those related to immovable property located in the aforementioned territory.

The problem arises, therefore, when it comes to the payment of VAT by the lessor who is not resident in Spain, how is this done?

In order to resolve this question, it is necessary to refer to article 84 LIVA, which indicates that they will be taxable persons for the tax:

1º Natural or legal persons who are entrepreneurs or professionals and who supply goods or provide services subject to tax, except as provided for in the following numbers.

2º Entrepreneurs or professionals for whom transactions subject to tax are carried out in the cases indicated below:

a) When they are carried out by persons or entities not established in the territory where the tax applies.


Two. For the purposes of the provisions of this Article, taxable persons shall be deemed to be established in the territory in which the tax is levied if they have there the seat of their economic activity, their tax domicile or a permanent establishment which is involved in the supply of goods and services subject to the tax.

Such a permanent establishment shall be deemed to be involved in the supply of goods or services when it organises its material and human factors of production or one of them for the purpose of carrying out each of them.


The position of the VAT taxable person is then reversed, therefore, the person liable to pay VAT would be the one who receives the service, and not the one who provides it, i.e. the tenant himself becomes the VAT taxable person.

For VAT purposes, in accordance with Article 69. Tres LIVA, immovable property operated on a rental basis or by any other means is considered a permanent establishment, provided that it is the fixed place of business where the entrepreneur or professional carries out his economic activity. However, if the owner does not permanently maintain in Spanish territory material and human resources, whether his own or subcontracted to third parties, for the exercise of the rental activity, it will be understood that he does not have a permanent establishment in Spanish territory.

Therefore, in the event that the non-resident lessor of premises does not have a permanent establishment in Spain, he is not obliged to register as an economic activity using census form 036/037 in the census of activities and, therefore, is not obliged to charge VAT.

In accordance with the provisions of Article 84 LIVA, what is known as “inversion of the taxable person” occurs, in such a way that it will be the businessman, the tenant of the premises, who will have to charge himself the VAT that must be applied at all times. In this case, if the tenant’s apportionment is 100%, the effect of self-recharging VAT will be neutral, as the amounts charged and borne will be the same.

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