Tax Newsletter

Case law:

Value Added Tax (VAT)

• Ruling of the Court of Justice of the European Union of 3 April 2025.VAT. Community of property regime.
  • The European Court is hearing case C-213/24, which concerns a request for a preliminary ruling submitted by the Administrative Court of the Voivodeship of Wrocław, Poland. The questions referred to the CJEU, and for which it must provide an answer, are, firstly, whether the provisions of the VAT Directive, in particular Articles 2.1 and 9.1, should be interpreted to mean that a person who sells a property that has not previously been used for any economic activity, and who engages a professional to prepare the sale — with the professional subsequently carrying out a series of organisational acts to divide the property and sell it at a higher price — is carrying out an economic activity for tax purposes. Secondly, whether the provisions of the VAT Directive, in particular Article 9.1, should be interpreted to mean that each spouse acting jointly and forming a legal community of jointly owned property should be regarded as independently carrying out an economic activity, either jointly or individually.
• National Court ruling of 2 April 2025.VAT. Deductibility.
  • The Court of Justice has ruled on the preliminary questions submitted and determined that, regarding the first question, Article 9.1 of the VAT Directive must be interpreted as meaning that a person who sells land that initially formed part of their personal assets and who entrusts the preparation of the sale to a professional operator — who, as that person's agent, carries out active property marketing operations, using means similar to those employed by a manufacturer, trader or service provider for that sale — may be regarded as a taxable person independently carrying out an economic activity for the purposes of that provision. Thus, regarding the second question, the CJEU holds that Article 9.1 of the VAT Directive must be interpreted as meaning that, in the context of a sale transaction classified as an economic activity within the meaning of the Directive, it does not preclude the legal community formed by the spouses as co-owners from being regarded as a taxable person independently carrying out an economic activity, provided that, vis-à-vis third parties, both spouses jointly carry out the sale of land belonging to that community — a transaction constituting an economic activity — and that the community assumes the economic risk associated with the exercise of that activity.
  • The National Court has ruled on contentious-administrative appeal no. 2618/2021, brought against the TEAC’s decision to dismiss the case, concerning the tax concept of VAT for the periods from July 2011 to December 2014 and from May 2015 to December 2018. The dispute centres on the deductibility of part of the input VAT incurred by the appellant entity, which is engaged in the vehicle leasing (renting) business and includes insurance cover in its rental contracts. Specifically, the contested deductibility concerns the portion of input VAT relating to invoicing for repairs to damage covered by comprehensive insurance policies.
  • The National Court upholds the contentious-administrative appeal and rules that the various services provided by the appellant under each contract signed with the customer must be regarded as a single transaction for VAT purposes. The Court further rules — following the interpretation of the Directorate-General for Taxation (DGT) — that the insurance service cannot be regarded as independent from the leasing service where the customer does not have the option to insure the asset with any company of their choice, or where the risk coverage is generally offered by the leasing entity without the customer being able to negotiate its terms, except in relation to the level of deductible or type of cover (compulsory insurance, insurance with deductible, or comprehensive insurance), nor contract it separately. In such cases, the insurance service, together with the leasing service, constitutes a single supply of services subject to VAT and not exempt. In short, the National Court concludes that the input VAT incurred on invoicing for repairs to damage covered by comprehensive insurance policies is deductible under the terms of Article 94.1.1.a of the Spanish VAT Law (LIVA).

Administrative Doctrine:

Value Added Tax (VAT)

• Ruling 00/01155/2023 of the Central Economic-Administrative Court (TEAC) of 20 February 2025.VAT. Deduction of payments.
  • The TEAC rules on the appeal filed by the AEAT against the decision issued by the TEAR of Catalonia, which resolves the economic-administrative claims filed against the tax assessment issued by the AEAT, relating to the VAT tax for the 2018 financial year. The contested issue raised in this appeal involves the appropriateness of demanding the tax accrued on the purchase and sale of two properties carried out during the audited periods and the recognition of the right to a partial deduction of the VAT paid on the acquisition of one of the properties by the entity.
  • The Central Court upholds the appeal and reiterates the criteria established in its ruling of 27 April 2025 (RG 00/00177/2013), in which it established that for VAT to be deductible, it must have been effectively borne, meaning that a prior act of passing on the tax must have occurred by the taxable person who carried out the transaction. Outside of the cases where the taxable person is the recipient of the transaction, in which the TEAC has stated that a full regularisation must be carried out that addresses both the accrual and the deduction, if there has been no corresponding act of passing on the VAT accrued by the taxable person carrying out the transaction, it means that the VAT has not been borne by the recipient and, consequently, VAT that has not been borne cannot be deducted. All of this is without prejudice to its possible deduction when the VAT is actually passed on.
• Binding Consultation V0151-25 of 12 February 2025.VAT. Exemption of leases.
  • The applicant is a commercial entity that will carry out work on a property it owns, currently used for hotel purposes, and intends to lease it to individuals for use as housing, without providing complementary services typical of the hotel industry. For the leasing, the entity will use various digital platforms. The question raised concerns the VAT liability and, if applicable, the exemption of such leases.
  • The DGT responds to the query raised and determines, on the one hand, that according to Article 11.2.15 of the VAT Law (LIVA), when a businessperson or professional acts on behalf of another, it must be understood that the leasing service is provided directly by the owner to the final customer, and the intermediary performs a mediation service, either to the owner, to the client, or to both simultaneously. As appears to be the case in the query, if the applicant leases the property through an agency acting on behalf and for the account of the applicant, it will be understood that the applicant is the one providing the leasing service directly to the clients. In addition, in accordance with Article 20.1.23 of the LIVA, the lease of a property when it is intended for exclusive use as a residence will be subject to but exempt from VAT, provided that the lessor is not obliged, among other things, to provide any of the complementary services typical of the hotel industry. As the consulting entity states, it will not provide complementary services typical of the hotel industry, so under these circumstances, the tourism leases in question will be subject to VAT but exempt from it.
• Binding Consultation V0146-25 of 12 February 2025.VAT. Purchases through digital platforms.
  • The taxpayer is a businessperson or professional who has made purchases, the intrinsic value of which does not exceed €150, from a Chinese supplier through a digital platform. The invoice is issued by the digital platform on behalf of the seller, and the VAT is declared by the digital platform. The question raised is to clarify how the invoice should be recorded in the VAT Purchase Invoice Register.
  • The DGT responds to the query and determines that, since the taxpayer has the status of a businessperson or professional for VAT purposes, in the case that the operation is classified as an import of goods, the taxpayer must record the Customs document (Import DUA) corresponding to the imported goods, indicating the reference number, as well as the taxable amount and the VAT amount due on the import, without needing to register the invoice or accounting document from the non-EU supplier.

Non-Resident Income Tax (IRNR)

• Ruling 00/04898/2021 of the TEAC of 20 February 2025.IRNR. Tax residence.
  • The TEAC rules on the economic-administrative claim filed against the provisional assessment issued by the National Tax Management Office of the AEAT, regarding the IRNR tax for Q1 of 2017. This case concerns the withholding tax on IRNR paid on amounts the claimant made to another entity, related to the performances of an artist at concerts in Spain. The Tax Administration requested information and documentation from the claimant about their involvement in the organisation of performances in Spain by various non-resident artists. In this regard, the documentation provided forms the basis for the assessment made, applying a 24% withholding rate, as the artist is a non-EU and non-EEA resident. The claimant argued that the 19% rate should apply, as the two companies from which they receive invoices for the artist's concerts are domiciled in the United Kingdom. The contentious issues raised in this economic-administrative claim revolve around resolving: 1) whether the 19% rate (under section 1(a) of Article 25 of the LIRNR) should apply instead of the 24% for an operation where a person resident in Spain contracts, through a non-resident entity for tax purposes in Spain, a non-resident artist (resident outside the EU and EEA) for performances in Spain, and 2) the non-taxation in Spain of the production costs listed in the issued invoice.
  • The Central Court dismisses the economic-administrative claim and reiterates the criterion established in its resolution of September 25, 2023 (RG. 7917/2020), in which it states that, regarding the application of reduced rates under Article 25 of the LIRNR, for a taxpayer to be considered non-resident and subject to the IRNR regulations, there is freedom of proof. This differs from the application of a Double Taxation Agreement (DTA) or Article 24.6 of the LIRNR, where no such flexibility exists, and a residency certificate is required as outlined in Spanish domestic regulations. Applying the previous criterion, the TEAC responds to the first issue by stating that, even though the artist is contracted through an entity, since the income is directly related to the artist's personal performance, for the purposes of income treatment, it is as if the artist were contracted directly. Therefore, it is the artist's residence that must be taken into account to determine both the applicable DTA and the decisive circumstances of their taxation and subjection to withholding. Regarding the second issue, the TEAC determines that the person or entity wishing to claim that all or part of the remuneration corresponds to peripheral or ancillary services related to the artist's performance or to production services unrelated to the performance must provide data and evidence to support their assertion. Otherwise, it would be left to the taxpayer's discretion to reduce the withholding base by excluding part of the amounts paid, without proving the reason for this or the exact amounts reduced, which would make it impossible for any reviewing body to assess the veracity of the claim and the legitimacy of the exclusion sought.