BDO Indirect Tax News

Spain - Tax authorities rule on VAT treatment of services provided by partners and administrators

Spain’s General Directorate of Taxes (GDT) issued a binding ruling (V0782-14) on 17 April 2024 that addresses the VAT treatment of services rendered by a partner and administrator of a company engaged in advertising and public relations.

Based on Spain’s VAT Act, the company—as an entrepreneur or professional—will be subject to VAT on the supply of goods and services in Spain within the scope of its business activity. In particular, services rendered by a partner to the company are regarded as a taxable supply of services under the EU VAT Directive if the services are carried out independently. However, if the services are provided within the scope of a dependent relationship, such as an employment relationship where the partner acts under the control of the company, the services are not subject to VAT.

In issuing its ruling, the GDT looked at the 21 December 2023 decision of the Court of Justice of the European Union (CJEU) (for prior coverage, see the article in the January 2024 issue of Indirect Tax News). The CJEU concluded that the activities of members of a board of directors of a Luxembourg public limited company are not subject to VAT based on the following:
  • The activity carried out by the administrator will be considered an economic activity for VAT purposes if the services are provided to the company for consideration and the activity is performed on a continuing basis; and
  • The economic activity will be considered to be carried out independently and thus subject to VAT only if the administrator acts on their own behalf and at their own risk, assumes full responsibility and bears the economic risks directly related to their activity.
In the case before the CJEU, no remuneration was provided for the services rendered by the board member, so the first requirement was not met.

In its ruling, the GDT considered Spain’s Capital Companies Act and determined that as long as the decisions are not contrary to the law or the company’s bylaws, liability would not be assumed by the director, so the director would not be acting as a VAT taxable person. The GDP concluded that the activity carried out by an individual who holds the position of administrator or member of the board is not subject to VAT, since they are not considered a taxable person for VAT purposes.

Potentially affected companies should be aware of and understand the implications of the GDT ruling, as it clarifies the VAT taxability of services rendered by a partner and administrator of a company and the associated compliance obligations.

Álvaro Gómez-Elvira
Maria Gonzalez
BDO in Spain
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