Irrigation services for clients outside the EU will depend on technology and profile

The determination of the tax burden in the provision of irrigation services for clients located outside the European Union is not uniform. The nature of the service and the status of the recipient are the determining factors in establishing whether the operation is subject to Value Added Tax (IVA) or if it falls outside its scope of application.

What the DGT has resolved

After analyzing the provision of services associated with irrigation equipment for clients established in third countries, the Dirección General de Tributos (DGT) has established the following criteria based on Law 37/1992:

• Business or professional recipients: If the client outside the EU is a businessperson or a professional, the services will not be subject to IVA.
• Individuals via electronic means: If the service is provided electronically and the recipient is an individual outside the EU, the operation will not be subject to the tax.
• Individuals via non-electronic means: If the service is not provided electronically and the recipient is an individual outside the EU, the operation will be subject to IVA, unless it falls under the specific services provided for in Article 69.Two of the IVA Law.

What it means for you

For companies operating with irrigation technology and having international clients, this criterion implies that the same tax treatment cannot be applied to all exports of services. The technology used in the provision (whether it is electronic or not) and the tax profile of the client (whether they are a professional or a final consumer) dictate the tax obligation. An error in the classification of the client or the method of provision could lead to an incorrect application of the tax.

What should be done

It is necessary to perform a detailed analysis of the company's commercial and technological operations. It must be precisely identified whether maintenance or irrigation management services are provided in an automated and electronic manner or through traditional means. Likewise, the classification of the client as a businessperson or an individual must be duly documented to justify the non-subjectivity to IVA in the cases permitted by the regulations. Each situation must be assessed individually to ensure compliance with current regulations.