March 2019
Spain’s Economic Administrative Court recently ruled on the interpretation of an exemption provided in the Spanish VAT Act for financial intermediary services.
The case involved the appeal of the Spanish Tax Authorities’ denial of application of the VAT exemption to specific services provided by a third party Spanish company to banks and financial institutions interested in outsourcing certain of their commercial activities to a third party.
In this regard, the services under analysis were, among others:
The Court based its decision on an analysis of the criterion set out by the Court of Justice of the European Union regarding the concept of ‘negotiation’, as worded in the VAT Directive, and the equivalent concept in the Spanish legislation (referred as ‘intermediation’). The Court concluded that the concepts are similar within the framework of the VAT exemption, because both require:
In conclusion, the Court confirmed the Spanish Tax Authorities’ view that the Spanish company to which activities were outsourced was not acting as an intermediary, but as an agent of the bank or the financial institution, since the potential clients’ perceptions were that they were engaging directly with the bank and not with a third party intermediating in the transaction. As a result, the Court was of the view the VAT exemption was properly denied.
David Sardá
david.sarda@bdo.es
Verònica Targa
veronica.targa@bdo.es