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V2745-20 8 September 2020 · SG de Impuestos sobre el Consumo Criterion in force
IVA · entrega de bienes

Classification of transaction as supply of goods or provision of services determines VAT liability

A Spanish company manufactures and assembles parts for an Israeli client. The DGT examines whether the transaction constitutes a supply of goods or a provision of services, and whether the client is entitled to recover the VAT incurred.

The question raised

Place of performance of the transactions carried out by the Spanish entity for the benefit of the Israeli entity and, if applicable, if they are subject to Value Added Tax, the procedure through which the Israeli entity may obtain a refund of the tax amounts it may have incurred.

The DGT's ruling

The nature of the transaction depends on the relative importance of the materials provided by each party. If the client's materials are predominant, it is a provision of services (not subject to VAT due to the absence of a recipient in Spain); if the manufacturer's materials are predominant, it is a supply of goods (subject to VAT). The Israeli client cannot request a VAT refund through the procedure set forth in Article 119 bis because the described transactions are not included in the reciprocity resolution.

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