Judgment of the Supreme Court related to the VAT use and enjoyment rule in connection with the recipient of the transactions


It comes again the controversial in the application of the VAT rule with regard to the location of services supplied B2B to a recipient not established in the Community, when the effective use or enjoyment of the service takes place in the VAT territory.

The controversy that arises in this case is related to who should perform the consumption of the service in the VAT territory, so that this is deemed to be located in said territory, i.e. the recipient of the service acting as intermediary or the final consumer.

The issue is about a Spanish company that provided telecommunication services to a company in Andorra, consisting in the sale of prepayment cards for mobile phones and packs integrated by mobile phones plus prepayment cards previously acquired from a Spanish operator, which can only be used in Spain. The Spanish company not charged the VAT on telecommunications services considering that these are located at the place of establishment of the recipient (Andorra), so it is not subject to VAT, while the tax administration understood that the rule contained in article 70.Dos of the Spanish VAT Act would be applicable in this case of services deemed to be placed in the VAT territory, where take place the effective use and enjoyment of the service.

The argument used by the Spanish company is based on the non-application of the article 70.Dos for the sales made to the recipient (entrepreneur) in Andorra, since the recipient does not use the service in Spain but that will be the final recipients to whom the Andorran company sells the service afterwards the one who enjoyed it in Spain. In this sense, considers the claimant that the controversy rule should be considered only with respect to the service supplied between the Spanish company and its recipient, without affecting the final destination given by of the final consumer of the service.

However, following the doctrine of the Court of Justice of the EU (case C-1/08, Athesia Druck SRL), the Supreme Court does not share the opinion of the Spanish entity, since according to the doctrine of the European Court of Justice, it is not relevant who makes effective use of the service (the intermediary or the final consumer), but the key point is that the service itself or the benefit derived from it is enjoyed or is consumed in the territory of application of VAT , as happens in the present case where the telecommunications services can be only used in Spain.

Attached is a copy of the judgment of the Supreme Court, with resource number 3488/2014 and dated April 6th, 2016.

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