The reimbursement of costs related to the displacement of a manager to its subsidiary constitutes an operation subject to VAT. ECJ’s judgment of March 11, 2020.


A company displaced a manager to its subsidiary, to develop a position of manager in one of its establishments. As a consequence of this displacement, the subsidiary received from its parent company an invoice for the costs associated with said displaced manager. The subsidiary, by reimbursing the costs to the parent company, applied VAT for the purposes of its subsequent deduction.

However, the Tax Administration considered that said reimbursement did not constitute a provision of services between the two companies, so the operation was not subject to VAT. Then, the Supreme Court had doubts about the economic nature of a displacement operation such as the controversial one, especially considering that there is an interest in said displacement and it is a significant amount. For such reason, the Supreme Court refers the question to the Court of Justice of the EU (ECJ) as to whether the displacement of personnel should be considered relevant for VAT purposes when only the reimbursement of the corresponding cost is paid.

The ECJ reminds, first of all, that all operations that are not a supply of goods are considered to be a provision of services. Furthermore, given that the status of taxable person is not disputed and that the place of supply is within the country, the main question is to determine whether the provision of services was carried out for consideration.

In this sense, according to the jurisprudence of the Court, “the operations subject to tax imply the existence of a business relation between the parties in which a price or equivalent value has been agreed.” Thus, if there is no direct counterpart, it is not possible to speak of an operation subject to VAT.

Likewise, from this affirmation it is derived that a provision of services is only carried out for consideration “if there is a legal relationship between the person who provides the service and its recipient, in which reciprocal benefits are exchanged and the remuneration received by the person who provides the service constitutes the effective counter value of the service provided to the recipient ”.

In this case, there is a legal relationship between the parties through which reciprocal benefits are exchanged, that is, the displacement of the manager versus the reimbursement of costs. The fact that only the cost is reimbursed is not decisive to exclude the operation from VAT, since there is a direct link between both benefits when they are mutually conditioned, so if it is demonstrated that the invoiced amounts were a requirement for the displacement of the manager and the subsidiary paid these costs, there will be a direct link between both benefits, which means that the operation is for consideration and, in conclusion, is subject to VAT.

The sentence is dated March 11, 2020, with case number C-94/19.

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