VAT treatment of the introduction of goods from another member state for modification and subsequent export
Binding tax ruling V0331-17, issued by the Spanish General Tax Sub directorate of February 7 2017.
The consultant entity is a Canada-based company dedicated to the manufacture of means of transport and that does not have any permanent establishment in the Spanish VAT Territory, that transfers in said territory motors from Germany to be sent, without transmission of its property, to an entity established in Spain that is contracted by the Canadian company to incorporate these assets to bigger components that later they are exported by the Canadian entity to China.
The question raised by this entity is the VAT treatment of this intra-EU transfer of goods from other EU Member States.
In principle, as laid down in article 16.2nd of the Spanish VAT, it could be understood that the transfer of the motors carried out by the consultant from Germany to the Spanish VAT territory is a transaction assimilated to an intra-Community acquisition of goods.
However, according to article 9.3rd.d) of the Spanish VAT Law, it would be excluded from the concept of operation assimilated to intra-EU acquisition of goods, those transfers of goods used for the execution of works on these goods that will be exported after said works are done, being said export of goods exempt pursuant to article 21 of the Spanish VAT Law.
Therefore, although the transfer of goods from a Member State other than Spain to the Spanish VAT territory by the consultant determines, in principle, the implementation of an operation assimilated to an intra-Community acquisition of goods, the fact that they will be an execution of work after which the finished product is exported to China under the conditions provided for in article 21 of the Spanish VAT Law will determine that, the intra-Community transfer of goods was not subject to Spanish VAT.
At this point, and although the ruling does not contemplate it, in our opinion, the Canadian company would be entitled to deduct the Spanish VAT paid as a result of the service received for the work performed on the engines, through the presentation of the corresponding VAT returns (303 forms), following the general Spanish regime, since having made exports of goods from the Spanish VAT territory gives the Canadian company the right to deduct VAT.
In addition, this ruling says that, if the goods were not exported to China, the transaction assimilated to an intra-Community acquisition of goods would be subject to Spanish VAT. In case that the Canadian company was entitled to recover its VAT paid by the special regime for non-established entities, such intra-Community transfers of goods would be exempted from VAT under article 26.Four of the Spanish VAT Law.