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Newsletter Fiscal November 25

Tax Newsletter

November 25

Daniel Tarroja, Tax Partner
01/12/2025
Newsletter Fiscal November 25

Case law:

Value Added Tax (VAT)

  • Judgment of the Court of Justice of the European Union of 23 October 2025. VAT. Tax refund.
    • The European Court hears case C-234/24, which is a request for a preliminary ruling from the Supreme Administrative Court of Bulgaria. The question referred for a preliminary ruling and on which the CJEU has to rule is whether Directive 2008/9/EC confers a right to obtain a refund of VAT paid which is claimed by the recipient of a supply of equipment (tooling) where the subject of the supply has not left the territory of the supplier’s Member State and the supply of that equipment has been artificially split from the intra-Community supply, to the same recipient, of goods manufactured by means of that equipment.
    • The CJEU rules on the question raised and states that Article 4(b) of Council Directive 2008/9/EC, read in conjunction with Article 138(1) and Article 171 of the VAT Directive, as amended by Council Directive (EU) 2018/1910 of 4 December 2018, must be interpreted as precluding a refusal to refund the VAT charged on the supply of equipment to a taxable person established in a Member State other than the Member State of purchase of those goods where that equipment has not physically left the territory of the Member State of its supplier unless, having regard to all the circumstances characterising the transactions in question, that supply must be regarded as forming part of a single, indivisible economic supply or as being ancillary to a principal supply comprising intra-Community supplies of goods produced using that equipment and intended for that taxable person.
  • Judgment of the Court of Justice of the European Union of 23 October 2025. VAT. Exemption relating to the granting of credit.
    • The European Court hears case C-232/24, which is a request for a preliminary ruling from the Supreme Administrative Court of Finland. The questions referred for a preliminary ruling and on which the CJEU has to rule are, firstly, whether where a factoring company acquires from a client invoiced debts not yet due so that the default risk relating to those debts is transferred from that client to that company (factoring taking the form of a sale of debts, “trade factoring”), the factoring commission which is charged by that company consisting of a percentage of each invoiced debt covered by the agreement is to be regarded as an adjustment to the purchase price of the acquisition of the debts or as another item outside the scope of the VAT Directive, or whether Article 2(1)(c) and Article 9 of the VAT Directive should be interpreted as meaning that that same company provides its client, in return for the factoring commission referred to, with a supply of services for reward falling within the scope of the VAT Directive. Secondly, the CJEU must also interpret whether the fixed arrangement fee which is charged to the client for setting up and activating the factoring arrangement in the context of trade factoring should be regarded as a consideration for the supply to the client of a service falling within the scope of the VAT Directive. Thirdly, whether where the fees referred to in the first two questions which are charged in the context of trade factoring are to be regarded as a consideration for a supply of services falling within the scope of the VAT Directive, Article 135(1)(b) and (d) of the VAT Directive should be interpreted as meaning that the factoring commission or the arrangement fee charged to the client are to be regarded as consideration for the supply of a tax-exempt service, or Article 135(1)(d) of the VAT Directive should be interpreted as meaning that it is the consideration for debt collection, which is to be regarded as a taxable supply of services, or the consideration for another taxable service. Fourthly, whether where a factoring company finances its client by granting it credit so that that client’s invoiced debts are used as collateral for the finance provided by that company (factoring taking the form of financing guaranteed by invoices, “invoice factoring”), Article 135(1)(b) and (d) of the VAT Directive should be interpreted as meaning that the factoring commission charged to the client, consisting of a percentage of each invoiced debt covered by the agreement, and the fixed arrangement fee for setting up and activating the factoring agreement must be regarded, at least in part, as a consideration for the supply of a tax-exempt service, or Article 135(1)(d) of the VAT Directive should be interpreted as meaning that it is the consideration for debt collection, which is to be regarded as a taxable supply of services, or the consideration for another taxable service. Fifthly, whether where the factoring commission or arrangement fee charged in the context of trade factoring or invoice factoring is to be wholly regarded as the consideration for a taxable service, the taxation of that service in application of the VAT Directive is so clear and unconditional such that, where the taxable person so requests, that taxation be recognised as having direct effect even though the exemption from VAT provided for by the national VAT law covers, besides the granting of credit, other financing arrangements.
    • The CJEU rules on the question raised and states, firstly, that Article 2(1)(c) and Article 9(1) of the VAT Directive must be interpreted as meaning that, as regards trade factoring, in the context of which the factor relieves the client of debt recovery operations and of the risk of the debts not being paid, the factoring commission paid for a debt collection service the value of which increases the longer the payment term and the greater the level of risk assumed by the factor and the arrangement fees paid by the client, which correspond to the flat-rate amount paid in order to set up the factoring process and which cover, inter alia, the cost of procedures relating to compliance with the obligations arising from the applicable legislation on money laundering, constitute the value actually given in return for the supply of services falling within the scope of that directive. Secondly, Article 135(1)(b) and (d) of the VAT Directive must be interpreted as meaning that the factoring commission paid for a debt collection service, the value of which increases the longer the payment term and the greater the level of risk assumed by the factor, and the arrangement fees paid by the client, which correspond to the flat-rate amount paid in order to set up the factoring process and which cover, inter alia, the cost of procedures relating to compliance with the obligations arising from the applicable legislation on money laundering, received by the factor in the context of a trade factoring or invoice factoring activity, which is characterised by the fact that the factor is responsible for the recovery and collection of the debts concerned which, without being transferred to that factor, are used as security for the financing provided by it to the client, constitute consideration for a single and indivisible supply of debt collection subject to VAT. Thirdly, Article 135(1)(d) of the VAT Directive must be interpreted as meaning that the exception relating to "debt collection" provided for in that provision is unconditional and sufficiently precise to have direct effect and, therefore, may be relied on by individuals before the national courts against the State.
  • Supreme Court ruling of 31 October 2025.VAT. Exemption in respect of supplies of goods.
    • The Supreme Court rules on appeal number 6833/2023 brought against the judgment handed down by the National Court which dismissed the appeal brought against the Regional Economic and Administrative Court of Catalonia ruling regarding the exemption from VAT for supplies of goods to travellers. The issues raised and on which the Supreme Court has to rule are, firstly, whether the requirement that VAT exemption on supplies of goods to travellers be made effective through the refund of input tax on purchases is a basic condition for eligibility for such exemption, which may be denied in the event of non-compliance. Secondly, whether a Member State's legislation making exemptions relating to exports conditional upon compliance with the refund procedure laid down by regulation is compatible with the principles of prohibition of unjust enrichment, fiscal neutrality of VAT, legal certainty and proportionality, given that these are considered necessary obligations to ensure the proper collection of VAT.
    • The Supreme Court upholds the appeal and, establishing the following interpretative criteria, determines that the requirement that VAT exemption on supplies of goods to travellers be made effective through the refund of input tax on purchases does not constitute a material requirement for eligibility for such exemption. It is not compatible with the principle of VAT neutrality or the principle of proportionality to deny the exemption for traveller exports provided for in Section 21 of the VAT Act and Article 9 of the VAT Regulations upon compliance with the refund procedure under the terms established by regulation when there has been no enrichment of the taxpayer, no risk of fraud or improper collection and, furthermore, there are no indications of tax offences having been committed.

Wealth Tax (WT)

  • Supreme Court ruling of 3 November 2025. WT. Non-residents.
    • The Supreme Court rules on appeal number 7626/2023, brought by the General State Administration against the judgment handed down by the High Court of Justice of the Balearic Islands, which upheld the administrative appeal filed in relation to the request for rectification of the self-assessment of wealth tax for the 2016 financial year. The issue raised and on which the Supreme Court has to rule is whether habitual residence, whether in Spain or abroad, justifies differing treatment in each case and, consequently, whether the tax limit in Section 31(1) of the Wealth Tax Act is not applicable to non-residents in Spain; or, if the reason for limiting gross tax payable for taxpayers under full liability is that the joint application of personal income tax and wealth tax does not result in a confiscatory effect, it can be justified that this same principle does not apply for non-resident taxpayers; and whether that difference in treatment would therefore be justified or, on the contrary, discriminatory towards them.
    • The Supreme Court holds that there is no basis for the appeal filed by the State Attorney General and, reiterating its own criteria [SSTS 1372/2025 of 29 October (Appeal 4701/2023)], determines that habitual residence, whether in Spain or abroad, does not justify the differing treatment accorded to residents and non-residents, whereby the latter are not subject to the gross tax payable limit in Section 31(1) of the Wealth Tax Act. This difference in treatment is discriminatory and unjustified.

Administrative legal commentary:

Personal Income Tax (PIT)

  • Binding Consultation V0879-25 of 23 May 2025. Personal Income Tax. Exemption for income earned abroad.
    • The petitioner, a pharmacist and tax resident in Spain, has been working (employment relationship) since 2022 for a Spanish company that manufactures pharmaceutical products and medicines. In 2024, he went on trips to India and worked at an Indian pharmaceutical company to monitor, supervise and control several pharmaceutical products which both companies (Spanish and Indian) are interested in and for which they have a commercial agreement. The costs of flights and hotels were paid for by the Spanish company. The query raised concerns whether the exemption established in Section 7(p) of the Personal Income Tax Act is applicable.
    • The DGT responds to the query raised, and based on Section 7(p) of the Personal Income Tax Act and Article 6 of the Personal Income Tax Regulations determines that in order to apply the exemption of the aforementioned section of the Personal Income Tax Act, the income must be derived from work performed for a company or entity not resident in Spain or a permanent establishment based abroad. According to the information provided in the consultation letter, the consultant's trips to India were for the purpose of monitoring, supervising and controlling various pharmaceutical products which both companies are interested in and for which they have a commercial agreement. Considering that the ultimate beneficiary of the services provided by the consultant in India is a company not resident in Spain, or a permanent establishment based abroad, this requirement would be met. Furthermore, both the worker's relocation outside Spain and the workplace's location, at least on a temporary basis, outside Spain are required. These requirements appear to be met based on the information provided by the petitioner. Finally, with respect to the requirement that earned income be taxed abroad, it should be noted that the only requirement is that the territory in which the work is performed levies a tax of a nature identical or similar to Spain's personal income tax and is not a country or territory classified as a tax haven, not that they are effectively taxed there. This requirement is considered to be met in particular when the country or territory where the work is performed has signed a Double Taxation Agreement with Spain that contains an information exchange clause, which is the case with India.