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V2338-24 11 November 2024 · SG de Impuestos sobre el Consumo Criterion in force
IVA · prestación de servicios por vía electrónica

VAT liability for digital services provided from the Canary Islands depends on the existence of a permanent establishment

A company providing digital services (web design, social media management, etc.) from the Canary Islands has requested a ruling on its VAT and IGIC taxation. The DGT has determined that the application of the reverse charge mechanism depends on whether the activity is carried out through a permanent establishment or a subsidiary.

The question raised

Taxation under Value Added Tax and the Canary Islands General Indirect Tax regarding the described services.

The DGT's ruling

Digital services provided to entrepreneurs or professionals within the territory of application of VAT shall be subject to tax if the recipient has its registered office or permanent establishment in said territory. If the applicant operates through a permanent establishment in the Canary Islands, it shall be a taxable person and must charge VAT. If it operates through a subsidiary that does not constitute a permanent establishment, the reverse charge mechanism shall apply. In both cases, the general tax rate is 21%.

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