VAT treatment of the services rendered by customers to an app
Binding tax ruling V1665-16 issued by the Spanish General Tax Directorate on April 18, 2016.
The consultant company is engaged in development of software apps for phones, tablets, computers and other electronic devices. One of the applications that is developing means that users will render services for the app consisting of activities of information, sound, images, geo-location, which will receive a payment for it.
This company asks about the VAT treatment of these services as well as the possibility that this company would issue the invoices on behalf of the users of the apps.
In this sense, the Spanish General Tax Directorate explains that the supply of the services carried out within the Spanish VAT territory, by companies or professionals for consideration, even irrespective of the purposes intended, are subject to VAT.
This Directorate puts in relation to the definition of subject to VAT, the concepts of entrepreneur or professional and provision of services, collected, respectively, in articles 5 and 11 of the Spanish VAT Law. Concluding that users of the application shall be regarded as entrepreneurs or professionals to the extent that they manage the factors of production with the purpose of providing a service under payment.
For this reason, users of the application shall comply with the main tax obligations of taxable persons, such as: VAT registration, obtaining a VAT number, issuing invoices, the regulatory recordkeeping and filing relevant tax returns.
However the above, the obligation to issue and deliver invoices, mentioned above, can be accomplished by the client (company dedicated to software applications) rather than by users of the application who provide services to it, provided that there is a prior agreement between the parties and which occurs the acceptance of each invoice and the sending of a copy of the invoice to the professional who carried out the service. In any case, invoices will be issued in the name and for the account of the user who rendered the service.
On the other hand, with respect to Personal Income Tax, the amounts paid by the company to the users of the app would not be subject to withholding by this tax, to not fit into any of the cases established by law for this purpose.