Since the introduction of VAT package rules in 2010, a non-resident entity making domestic supplies of goods or services to taxpayers in Spain is only liable for VAT if it meets two conditions:
- it has a PE in Spain
- the PE intervenes in the performance of the transactions carried out on Spanish VAT territory.
The concept of PE is stated in Spanish VAT Law, in the relevant European Council regulation, and has been interpreted by the DGT. However, the scope has not always been the same, leading to different interpretations and some confusion.
Based on the European Council Regulation, the intervention of the PE only exists if it has a sufficient degree of technical or human resources in the performance of its core activities, and these resources are effectively used to carry out the supplies. Spanish VAT Law has a similar approach to the European Council regulation. Under these rules, the mere storage of goods in call-off/consignment stock structures does not generally trigger VAT PE exposure in Spain; consequently, a reverse charge could be applied to domestic supplies of goods derived from the delivery of the stock to the customer.
Nevertheless, the DGT has recently issued a controversial tax ruling in which the concept of a VAT PE and intervention are subject to wider interpretation. In particular, the DGT considered the mere hiring of a warehouse, or the use of technical or human resources to handle the storage and supply of goods on Spanish territory, enough to trigger the existence of a VAT PE that intervenes in the supplies of goods. The entity in question would therefore be deemed a VAT taxpayer liable to apply the corresponding VAT on the supplies of goods to Spanish customers (the reverse charge mechanism would not be applicable).
This interpretation differs from the one applied by tax authorities previously, where the mere use of a storage space did not create any PE.
It is important for companies to consider this new interpretation. However, this is only one ruling and tax authorities are not expected to officially review their criteria in the near future. Still, businesses should carefully follow the issue as it develops.