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V0144-23 6 February 2023 · SG de Impuestos sobre el Consumo Criterion in force
IVA · sujeto pasivo

Services provided by a branch to its head office are not subject to VAT if the branch does not assume the economic risk

An entity inquired whether financial intermediation services provided by its branch in Spain to its head office in the United Kingdom were subject to VAT. The DGT responds that if the branch does not assume the economic risk of its activity, it is not an independent taxable person and the operations fall outside the scope of the tax.

The question raised

Whether the operations between the established branch and the British entity are subject to Value Added Tax.

The DGT's ruling

For services between a branch and its head office to be subject to VAT, the branch must be an independent taxable person that assumes the economic risk of its activity. The assumption of risk requires the capacity to make autonomous decisions and the availability of funds to meet potential losses. If the head office assumes the risk, there is no legal relationship of exchange between independent entrepreneurs and the services fall outside the tax. If the branch does assume the risk, the provision will be subject to VAT, even if it is not accrued in Spain because the recipient is a non-resident taxable person.

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