Supply of services from a Public Entity to the State Administration. Binding tax ruling as regard the VAT application in these services
With the wording of the Law 28/2014 amending the Law 37/1992 of VAT, due to the tax reform operated by the Government, a section was introduced in the Article 7 of the VAT Act, so leaving not subject to VAT “the services rendered under management commissions by authorities, organizations and public sector entities that hold, in accordance with the provisions in Articles 4.1.n) and 24.6 of the Consolidated Law on Public Sector Contracts, approved by the Royal Legislative Decree 3/2011 of 14 November, the condition of instrument and technical service of the commitment Public Administration and the depending contracting authorities.”
Through the Binding tax ruling number 1791/2015, of August 6th, 2015, the General Directorate of a Ministry of the State Administration asks whether the services that will be provided by a public entity, which has the status of an instrument and technical service of the State Administration, are subject to VAT.
The General Tax Directorate answers the question firstly referring to the condition of an entrepreneur or professional established in the VAT Act, as well as to the definition of business or professional activity, and recalling that these provisions are of general application, so that a Public entity will also have this condition when ordering on its own a set of human and material resources, independently and under its responsibility, to develop a business or professional activity by performing continuous supply of goods or services for consideration.
However, under new paragraph 8 of Article 7 of the VAT Law, in so far as the public company has received a management entrusted by the State Administration adjusted to the provisions of the Law on Public Sector Contracts, aimed to the provision of technical services as an instrumental mean, these services will not be subject to VAT, regardless of the character of entrepreneur or professional that the public entity may have on other services provided independently.
A copy of the Binding tax ruling in Spanish is attached.