Clausula de cierre

 

 

The place of supply of services for VAT purposes in an international context is an issue of great importance. In this case and generally, the place of VAT taxation for services supplied by one business to another (B2B) is the location of the customer’s headquarters.

However, the regulation on effective use and enjoyment is an exception to the rule, stipulating that the place of taxation for certain services is the Spanish tax territory (TAI). This regulation applies when the customer’s place of establishment is outside the EU but the place of effective use and enjoyment is TAI.

Therefore, this special rule applies when: (i) the service appears in the list of services affected, including consultancy, legal services, advertising etc.; (ii) The customer is a business based outside the EU; and (iii) the place of effective use and enjoyment is TAI. If these conditions are met, the service will be subject to Spanish VAT.

In the resolution of 28/3/2019, the Central Economic-Administrative Court (TEAC) established that to meet condition (iii), the transactions carried out by the customer must take place in TAI, and there must be a direct link between the services supplied and the customer’s activity. However, should the formal customer not be the final customer of the transaction, the regulation on effective use and enjoyment may still be applied (i.e. indirect relation).

The application of this regulation in situations where there is an indirect relation is a controversial issue, and therefore each individual case should be analysed carefully.

Finally, it is worth remembering that the VAT Directive does not require the compulsory application of the regulation on effective use and enjoyment to each Member State’s domestic regulations, and in fact, Spain is among the few that have opted for its application.

 

Authors:

Paula Piñeiro

Paula Piñeiro
Tax Advisor, Madrid
ppineiro@bovemontero.com
+34 91 561 54 14

Andreu Bové

Andreu Bové
Tax Advisor, Madrid
above@bovemontero.com
+34 91 561 54 14

 

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