Reverse Charge in Spain
Spanish reverse charge for non-established companies
According to art 194 of the VAT Directive, Member States may implement an optional reverse charge on supplies made by non-established businesses. Spain has introduced an extended version of this reverse charge. Where a non-established supplier sells goods to a taxable person, domestic reverse charge applies. It is not relevant if the supplier is registered or not. Regarding the customer, it is not relevant if it is established or VAT registered. Even when the customer is not VAT registered, reverse charge applies, hence requiring this customer to register and account for VAT. For services, however, domestic reverse charge would only apply where a) the supplier is not established, b) the service is located in Spain according to the exceptions to the B2B rule (e.g. admission to events, land related, etc.) and the c) the customer is established in Spain for VAT purposes.
Supplier requirementsNot established in Spain (irrelevant if the supplier is registered or not for VAT)
Customer requirementsTaxable person (irrelevant if the customer is established or VAT registered). For services: Taxable person established in Spain.
ScopeAll supplies of goods. Supplies of services located in Spain (exceptions to the B2B rule) when the customer is established
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Spanish reverse charge on B2B Services
Article 196 of the VAT Directive requires the reverse charge mechanism on all services subject to the B2B rule introduced in art. 44 of the same Directive. The B2B rule locates the transaction where the business customer is located. In case the customer is a private individual, B2C rules locate the transaction where the supplier is located. According to the general B2B rule, any business not established in Spain supplying services to a Spanish registered customer will not charge any VAT and the transaction will be reverse charged by the customer. There are however a number of exceptions to this rule. Where these exceptions apply, reverse charge is still applicable in Spain:
- Services connected to immoveable property are located where the property is located.
- Passenger transport services will be located where the transport takes places (apportioned if necessary).
- Catering services are located where the catering takes place Short term leasing of means of transport are located where the vehicle put at the disposal of the customer.
- Access to conferences, fairs and exhibitions is located where the event takes place.
There are additional exceptions to the B2B rule such as certain intermediary services, freight services and others. Also, Member States can implement the Use and enjoyment rule also deviates the place of supply from the usual B2B rule.
Reverse charge on specific goods in Spain
Domestic reverse charge may also apply on certain specific goods or services. This regime is often introduced on products that are more likely to be used for carousel fraud purposes. The customer and supplier conditions for this reverse charge to apply change depending on the goods traded. IT equipment: Reverse charge applies on mobile phones, video-consoles, laptops and tablets. For this RC to apply, there're two scenarios based on value and customer conditions:
- Where the customer is a "reseller", RC applies irrespective of the threshold.
- If customer is not a "reseller", RC applies on supplies above 10k €.
Resellers (companies buying and selling these goods as their usual business) need to apply for a certificate. They will provide this certificate to their supplier as a proof of the need to apply RC. Supplies of natural gas and electricity: Reverse charge always applies on supplies of natural gas and electricity provided the supplier is not established, and the customer is a taxable person. Other goods: Reverse charge applies to the following goods and services applies in any case.
- Emission rights and emission units
- Supplies of waste.
- Supply of certain gold products
- Raw or semi-manufactured silver, platinum and palladium.
- Supplies of gas and electricity, when the supplier is a non-established company, and the customer is a taxable person VAT registered in Spain.
- Construction services.
- Certain supplies of immovable property.
Spanish use and enjoyment rules
When it comes to establishing the place of supply of a transaction, Member states may introduce another exception to the B2B rule according to the place where the services have been used and enjoyed. This exception may be introduced to avoid double taxation (positive use and enjoyment rules) or to avoid non-taxation (negative use and enjoyment rules) or both. Spain has introduced the negative use and enjoyment, hence attracting the place of supply to Spain if the customer is established outside the EU but the actual use of the service is connected to Spain. This the scope of the use and enjoyment rule in Spain:
- The following services are in scope for the B2B transactions: the lease of means of transport.
- Also, the negative use and enjoyment rule applies to the B2C supplies of intangible services and lease of means of transport made to customers not established in the EU, when the actual consumption takes place in Spain. The list of intangible services consists of the transfer of copyrights and similar services, supply of staff, financial and banking services, data processing, consultancy services, advertising services, hiring of moveable property, and access to electricity and gas.
Find here the VAT news related to the recent change on the Spanish use and enjoyment rules.
Spain has not introduced the positive use and enjoyment rules which deviate the place of supply to a non-EU country where the services are used and enjoyed in that EU country. In these scenarios, there is indeed a risk of double taxation in Spain.