Accommodation managers in the Canary Islands will not apply VAT if they lack a permanent establishment

The geographical location of the headquarters of a travel services management entity is the determining factor in establishing liability for Value Added Tax (VAT). Recently, the Dirección General de Tributos (DGT) has specified the tax treatment applicable to entities that market accommodation from the Canary Islands to the rest of the national territory.

What the DGT has resolved

The ruling analyzes whether the sale of hotel accommodation carried out by a management entity based in the Canary Islands is understood to be performed in said territory, even if operating under the special regime for travel agencies. The administration's criterion is based on the fact that travel service operations carried out in one's own name are considered to be performed in the place where the entity has its headquarters or a permanent establishment.

In this sense, if the management entity is headquartered in the Canary Islands and does not have a permanent establishment in the territory where the tax applies (the mainland), its bed sales services will not be subject to VAT. However, the resolution clarifies that this criterion does not exempt other parties in the commercial chain from their obligations.

What it means for you

This criterion has a direct impact on the operational structure of accommodation management companies operating from the Canary archipelago. If your activity is materially carried out from the Canary Islands and you do not have a physical presence or permanent establishment on the mainland, your intermediation or bed management services fall outside the scope of VAT.

Nevertheless, it is necessary to distinguish between the management entity and the marketing entity. If there is a company on the mainland acting as a marketer of these services, said entity will indeed be obliged to apply the special regime for travel agencies in its operations.

What you should do

Entities operating under this model must verify the nature of their presence in the territory where the tax applies. The existence of a permanent establishment, as defined by Law 40/2015, would completely alter the tax treatment of their operations. It is fundamental to ensure that the headquarters of the activity and the material management coincide with the location intended to be declared to avoid contingencies with the Tax Administration.