VAT treatment of certain financial services
Binding tax ruling V2959-15 issued by the Spanish General Tax Directorate on October 7, 2015.
This consultation was submitted by a financial institution that manages the payment of dividends and the custody and administration of shares, services that charges VAT to their customers. So this entity intends to receive confirmation on whether it should or not charge VAT on services related shares management and payment of dividends.
According to article 20.One.18º.k) of the Spanish VAT Law, shall be exempt of VAT, among others, the financial transactions related to shares, participations in companies, bonds and other values, except for deposit and management services of these securities or shares.
This precept is the transposition into the Spanish VAT Law of the provisions of article 135.1. f) of the VAT Directive 2006/112/EC.
In order to know if the service is considered as exempt from VAT it is crucial to understand the meaning of “management in shares or securities”. In this regard, the Court of Justice of the European Union has concluded that such operations are those that can create, modify or extinguish the rights and obligations of the parties on shares or securities.
Therefore, are considered services of management in shares, non-exempt, the custody of securities, the payment of dividends and interest, the collection of premiums from assistance to boards, administration and management of the securities portfolio, or services of advice and financial planning in operations such as expansion of capital, emission, amortization or redemption of securities.
Therefore with this questioned services relating to the payment of dividends and the custody and management of securities will be subject and not exempt from VAT.