Partners acting under labor subordination will not be subject to VAT on their services

The nature of the relationship between a partner and their company is a critical point for the correct application of Value Added Tax (IVA). The Dirección General de Tributos (DGT) has specified the necessary criteria to distinguish whether the provision of services by a partner constitutes an operation subject to the tax or if, on the contrary, it is a relationship of a labor nature not subject to this tax.

What the DGT has resolved

Through ruling V0328-25, the binding body establishes that the key lies in the existence of a relationship of dependency or labor subordination. For a partner's activity to be subject to VAT, elements of autonomy must be present to demonstrate that they do not act as just another employee of the entity. These elements include:

• Own organization: The partner must organize their own means for the provision of the service.
• Absence of subordination: They must not be subject to the company's organizational criteria.
• Variable remuneration: Payment must be linked to results and not be a fixed remuneration of a labor nature.
• Assumption of risks: The partner must assume responsibility towards third parties and the economic risk of their activity.

If the partner uses the company's resources, does not assume economic risks, and acts under the orders of the entity, the provision will not be subject to VAT as it falls within a relationship of subordination.

What this means for you

This resolution directly impacts two figures: the company that hires and the individual partner providing the service. For the entity, it is fundamental to correctly identify the nature of the relationship to avoid errors in the application of the tax and possible sanctions for the non-application of VAT when appropriate, or for its undue application.

For the partner, the distinction determines their obligation to issue invoices with VAT and their taxation regime. If the activity is carried out with total autonomy and risk, it is an economic activity subject to the tax; if subordination exists, the relationship shifts to the scope of social security and income tax on employment income.

What should be done

It is necessary to evaluate the operational reality of the relationship between the partner and the company. The contractual designation is not enough; the tax administration will analyze how tasks are executed, who provides the means, and how remuneration is structured. It is recommended to document the partner's technical and organizational autonomy if the intention is to apply VAT liability.