THE CREDITOR IN THE OBLIGATION, ACCORDING TO THE LEGAL RELATIONSHIP, WILL BE THE RECIPIENT OF THE TRANSACTION FOR VAT PURPOSES. BINDING TAX RULING OF AUGUST 20, 2019
The Spanish General Tax Directorate (DGT) clarifies, through binding tax ruling number V2250-19, who should be considered the recipient of an operation and, therefore, to whom must be charged the VAT by the taxpayer.
Although it seems an obvious issue, we often find a situation in which a supplier provides a service or supplies goods to a recipient, but when issuing its invoice and charging the corresponding VAT, the addressee of the invoice and, normally, who will pay the agreed consideration, is a person other than the recipient of the operation. This situation may be usual especially in cases where the recipient of the operation is part of a group of companies, where a service is provided to an entity but the parent company is billed.
It should be borne in mind that the change between the recipient of the operation and the addressee of the invoice may lead to cases in which the operation carried out has a different VAT treatment, since in most cases the VAT place of supply rules are affected by the condition of the recipient or where their economic headquarters or permanent establishment is based.
In the mentioned ruling, a taxpayer enters into a contract with an entity, whose seat of economic activity is in the VAT territory, to provide an intermediation service as a commercial agent, for the sale of training courses in the name of the contracting entity. However, the contracting entity indicates that the invoices issued by the taxpayer must be addressed to an entity with economic headquarter in the Canary Islands (out of the scope of VAT).
In this case, the DGT clarifies that, the recipient of the operation is the one for whom the supply of goods or services subject to VAT is performed and that occupies the position of creditor in the obligation in which the aforementioned entrepreneur or professional is debtor and of which said supply or service constitutes the benefit. In addition, the obligation must be understood as the legal link that binds the two parties, by virtue of which one is subject to make an operation in favour of the other.
In this case, the entity with which the contract is signed, that is the basis of the legal obligation, is the entity based in the VAT territory, so it will be who occupies the creditor position against the render of the service and who will have the condition of recipient of the operation. Therefore, pursuant to the article 88 of the Spanish VAT Act, it will be said entity to whom the taxpayer must charge the VAT and not to the entity based in the Canary Islands.