Spanish VAT legislation on the place of supply of certain services: harmonizing with the European VAT legislation

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Expert Opinion
November 7, 2022

The Spanish Government on 6th October presented the draft of the General State Budget for 2023 (hereinafter “GSB”) to the Congress for their approval, which contains relevant aspects of the Spanish VAT legislation on the place of supply of certain services.

With the aim of harmonizing the national regulations with those of the EU in article 72 of the PPGE, the Government decides to regulate the debate that has arisen regarding the use and enjoyment rule of services contemplated in article 70. Two of Law 37/1992 on Value Added Tax (hereinafter “LIVA”).

General rule regarding the place of performance of services to non-established companies.

From an EU VAT point of view, services are deemed to be supplied at the place where the recipient is established, according to the general B2B VAT place-of-supply rule for services indicated in article 44 of the VAT Directive and article 69.1 LIVA.

In this sense, according to the general VAT places of supply rule foreseen in article 69.1 LIVA, in principle, the services to a non-established entity for VAT purposes would not be subject to Spanish VAT.

Use and enjoyment rule: exception to the general rule.

An exception to the above-mentioned general B2B place-of-supply rule is foreseen under article 59a b) of the VAT Directive, mirrored under article 70. Two LIVA: the so-called “use and enjoyment” rule. Its function is to ensure the taxation within the Spanish VAT Territory of those supplies of services which are effectively used or exploited in such territory.

Legislative change on article 70.Two LIVA of the Spanish VAT legislation.

In order to avoid these situations of legal uncertainty, the Spanish Government has decided to clearly delimit the scope of application of the rule of use and enjoyment in article 70. Two LIVA. Its purpose is to locate the territory of application of the tax, those services that according to the general rule of article 69 LIVA would be out of the scope for those services whose effective use or exploitation is carried out in the Spanish territory.

This change in the law would mean that:

  • It will not apply to supplies of services between entrepreneurs who carry out activities with a right to deduct and will be maintained for entrepreneurs who do not generate such a right, such as the financial and insurance sectors.
  • Its application is extended to the supply of intangible services to final consumers not established in the EU when it is established that their consumption or effective exploitation takes place in the Territory of application of the tax.
  • This clause shall also apply to the hiring vehicle of transport in order to avoid situations of tax evasion or avoidance.

This measure, which will enter into force with the Law of the PGE and will be in force i, will not be applied retroactively, as indicated in article 72 of the PPGE.

It is understood that this is a very important update in terms of VAT to avoid any undue VAT. If what we’ve covered in this article raises any questions, do not hesitate to reach out to us at

Author: Paula Herrero, Senior Consultant, VAT – Ayming Spain

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