Spanish VAT: Taxable Locations, Exemptions, and Non-Taxable Cases

Posted on Jan 29, 2025 in Law

3. Place of Taxable Deliveries Deliveries whose location is Spanish territory accrue Spanish VAT. We must distinguish between goods and services.

A) Place of Delivery of Goods With respect to the orientation property, it may be noted that it is usually taxed at the destination, i.e., where the good is delivered.

Which means supplies of goods made in Spanish territory?

  1. If dispatch or transport is needed, it will be understood to be located here if the start of the transport takes place in Spanish territory.
  2. If the issue of transportation is not needed, it means made available to the purchaser’s place in Spanish territory.
  3. With regard to supplies of property, it is deemed to be made here if the property is in Spanish territory.

B) Place of Performance of Services What services are understood to be in Spanish territory? There has been a recent amendment by Law 2/2010 pursuant to a European directive. Look at the recipient criteria and distinguish between employer and thereon.

  1. The provision made in Spain means if the recipient is an entrepreneur and brings the condition to be established in Spanish territory. This is regardless of the State of establishment of the provider.
  2. The provision is meant to be conducted in Spanish territory if the provider is an entrepreneur and is established in Spanish territory, and also the recipient is an individual who is established in the European Union.
  3. Services whose effective use is made in Spanish territory in cases of 13 activities defined, including the legal profession and financial services when the recipient is a trader not established in Spain.

4. Non-Taxable Cases are enshrined in Article 7 of the VAT Act. Among them are:

  1. The transfer of all assets under certain conditions.
  2. The provision of free samples or merchandise.
  3. Free services for demonstration purposes.
  4. The delivery of advertising objects.
  5. Labor relations, the relationship between the worker and the employer.
  6. Administrative relations (refers to the relationship of the official with the Administration).
  7. Mandatory delivery services.

Regarding the result, the main one is that in transactions not subject, input tax on deliveries cannot be deducted when the case is given.

5. Inside Deliveries Exempt Its regulation is in Article 20 of the VAT Act. We can do three sets of transactions exempted from domestic deliveries (deliveries in Spain).

First, services that relate to powers of the State such as health care, social security, welfare, education and training, and cultural activities.

Second, most interior areas of financial operations are exempt, such as those relating to deposits, shares, and bonds.

Third, certain real estate transactions are exempt, such as the second and subsequent delivery of buildings and the leasing of housing and rural land (arts. 20.1.23 of VAT Law).

In a scheme of impact-exemption, it means no impact on the delivery-end. In addition, this results in not being able to deduct the taxes charged on delivery-entry of the taxpayer on the activity.