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V2211-21 31 July 2021 · SG de Impuestos sobre el Consumo Criterion in force
IVA · mediación financiera

Financial mediation exemption requires active engagement of parties rather than mere provision of information

An Italian company seeks clarification regarding the location of its Spanish branch's services, VAT exemption, and the treatment of transfer pricing adjustments. The DGT clarifies that the mediation exemption requires active solicitation activities and analyses the taxability of accounting adjustments between a parent company and its branch.

The question raised

1. Location of the services provided by the branch for Value Added Tax purposes, exemption and the right to deduction. 2. Liability of the adjustments by which the tax benefit is attributed between the head office and the branch.

The DGT's ruling

For financial mediation to be exempt, the provider must be a third party performing an active role in bringing the parties together, going beyond the mere provision of information or advertising. The mediation activity requires an additional element, such as the analysis of the client's financial situation or direct contact for formalization. If the branch does not assume the economic risk of its activity, the services provided to the parent company fall outside the scope of VAT. Transfer pricing adjustments may modify the taxable base if they are assimilated to price alterations of previous transactions.

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