A very important sentence by the Spanish Supreme Court about permanent establishments in Spanish territory may involve the multinational groups to review their structures in order to avoid the possible existence of unwanted, permanent establishments.

13 Aug A very important sentence by the Spanish Supreme Court about permanent establishments in Spanish territory may involve the multinational groups to review their structures in order to avoid the possible existence of unwanted, permanent establishments.

The Spanish Supreme Court has recently ruled the verdict number 1626 / 2008 (case “Roche”) and concluded that the activity of manufacturing and sales promotion undertaken by Roche Vitamins, S.A. (RV), a Spanish branch of the Swiss company Roche Vitamins Europe Ltd.  (RVE) constitute a permanent establishment of the latter in Spanish territory in accordance with article 5 of the Convention to avoid double taxation in the field of income tax between Spain and the Switzerland Confederation of April 26, 1966 (CDI).

The Supreme Court considers RVE does not have a permanent establishment in the “typical” sense, nor it has a fixed place of business in Spain nor has a dependent agent with powers to bind RVE”.  However, the High Court interprets the current wording of the OECD Convention model is open to consider that within the figure of the agent there are different activities other than the one of “concluding contracts on behalf of the company” including those activities that would have been possible directly through a fixed place of business (as is indeed the case of producing goods that it then sells and distributes).

Sentencia Caso Roche