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V2932-18 14 November 2018 · SG de Impuestos sobre el Consumo Criterion in force
IVA · cesión de derechos

Assignment of image rights to non-residents is not subject to VAT if there is no effective use in Spain

An image rights management company inquired whether holding events in Spain (such as photo shoots) triggers the 'effective use' rule for VAT regarding non-resident assignees. The Directorate General for Taxes (DGT) ruled that the mere fact that the provider performs the service in Spain is insufficient; if the recipient does not carry out taxable operations within the territory, VAT does not apply.

The question raised

Whether the fact that photo shoots or meetings with athletes take place in the territory of application of the Tax would, in itself, give rise to the application of the closing rule provided for in Article 70.Two of Law 37/1992. Whether, in cases of partial application of the aforementioned closing rule, there exists any weighting criterion that must be used to determine the effective use in the territory of application of the Tax.

The DGT's ruling

To apply the effective use rule of Article 70.Two, the service must be used by the recipient in the performance of transactions subject to VAT in the territory. The place where the provider materially performs the service does not determine the application of this clause. If the assignee does not perform transactions subject to the tax in Spain, the assignment of rights shall not be subject to VAT. In the event of partial use, the proportion of income constituting a business input must be determined relative to the total income obtained from the use of the service.

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