Mediation services to non-resident clients are exempt from VAT

The Directorate General of Taxes (DGT) has issued a relevant ruling regarding the VAT taxation of mediation services when the client is an entrepreneur or professional not established in the territory where the tax applies. This pronouncement clarifies the tax status of intermediation activities carried out for foreign entities.

What the DGT has ruled

The query concerned the liability for Value Added Tax (IVA) on mediation services provided by an applicant. The DGT has ruled that mediation services carried out on behalf of others for entrepreneurs or professionals who do not have their place of economic activity or permanent establishment in Spain are not subject to VAT.

The criterion is based on determining the place of supply. According to the applicable regulations, the place of the transaction is established by the location of the headquarters of the economic activity or the permanent establishment of the service recipient. Since these are not located in Spanish territory, the operation falls outside the scope of the tax.

What it means for you

This criterion has a direct impact on companies operating as mediators or commission agents for foreign clients within the framework of international operations. If your activity consists of mediating on behalf of a client who has no physical presence or economic headquarters in Spain, said service should not include the tax.

The key lies in the location of the recipient. It is essential to verify that the client is effectively an entrepreneur or professional not established in Spain so that the operation is not subject to VAT.

What should be done

Companies providing mediation services to international clients must ensure correct documentation of their recipients' non-resident status. It is necessary to have evidence that proves the location of the client's economic activity headquarters to justify the non-subjectivity to the tax in the event of an inspection. It is recommended to assess each particular case to confirm that the requirements of current regulations are met.