Location for VAT and IGIC purposes of a service of repair of a solar photovoltaic production Park located on the cover of a building. Binding tax ruling
The consultant is an entity established in the Canary Islands that provides a service of repair of a solar park of photovoltaic production, which is located on the cover of a building situated at the Canary Islands. The entity providing the service is subcontracted by another entity established in the Iberian Peninsula, which is the holder of the maintenance contract.
The key point to determine the proper tax treatment for the purpose of the location of the service is to find out if it can be considered related to real estate, since in this case the location of the own property will lead the subjection to VAT or to IGIC, or if the service should be governed by the general B2B place of supply rule, that is, place of establishment of the recipient.
To do this, the General Tax Directorate of Canary Islands goes through the VAT Directive (article 47) which regulates this standard and, in turn, to the case-law of the Court of Justice of the EU (case C-166/05 – Heger Rudi GmbH), where the Court establishes that they are only covered within the scope of article 47 “services with a sufficiently direct relation to the real estate involved, as this is the central and indispensable element of the provision.
However, in any case it is also necessary to determine the concept of immovable goods, because only in the case that the “essential element” is under such definition, it can be assessed whether the service is related or not thereof. Again, the General Tax Directorate use the European Community rules, and in particular the definition contained in article 13.ter of the implementation regulation 282/2011, while recognizing that, even though this wording is not in force until January 1, 2017, its content should be considered for the purposes of the application of article 47, as established in the European Court of Justice in case Welmory (C-605/12).
Thus, the letter d) specifically defines as immovable goods “any item, machine or equipment installed permanently in a building, which cannot be moved without destroying or modifying such building or construction”. Similarly, article 31.bis of the Regulation specifies some services that are considered to be directly related to immovable goods, among which are the maintenance and repair of machines or equipment if such machines are considered immovable goods.
The criterion of the General Tax Directorate is to consider that a solar park located on the cover of a building has the nature of immovable goods itself, provided, we understand, that it is fixed permanently to the building. Since a repair service cannot be understood without the main element, it is undoubted that it is directly linked with the real estate, which leads to consider the supply of the service where the latter is placed, i.e., in the Canary Islands in this case and, therefore, would be subject to IGIC.
Attached is a copy in Spanish of the Binding Tax Ruling number 1748 and dated November 2nd, 2015.