Partners providing services to their own company must meet independence requirements to apply VAT

The nature of the relationship between a partner and their own company is a critical point for determining tax obligations. The mere provision of a service is not enough for it to be subject to Value Added Tax (IVA); it is necessary to analyze the actual structure of the provision and the professional's degree of autonomy.

What the DGT has ruled

The Dirección General de Tributos (DGT) has established that to determine whether a partner's activity is subject to VAT, a distinction must be made between an independent provision of services and an employment relationship. According to the administrative criteria, the activity will not be subject to the tax if the partner acts under a relationship of subordination.

For it to be considered an employment relationship (not subject to VAT), the following elements must be present:

• The professional submits to the organizational criteria of the company.
• The remuneration is not linked to the achievement of specific results.
• The company is the one that responds to third parties for the activity.

Conversely, the activity will be subject to VAT if the partner acts independently, organizes their own resources, assumes the economic risk of the activity, and responds to third parties.

What this means for you

If you are a partner in an entity and provide services to it, the classification of your income will depend on your operational autonomy. If the company dictates how, when, and where you perform your work, and if your remuneration is fixed and does not depend on your risk management, the Administration will understand that an employment relationship exists. In this scenario, you should not issue invoices with VAT, but rather manage the remuneration under the employment income regime.

If, instead, you manage your own technical resources, assume the possibility of losses, and act with organizational autonomy, the provision of services is subject to VAT in accordance with Law 37/1992 and Directive 2006/112/EC.

What you should do

It is necessary to evaluate the reality of the service provision against the formal structure of the company. Determining whether subordination or independence exists is fundamental to avoid errors in the application of VAT and Personal Income Tax (IRPF). Each situation must be analyzed individually to ensure that the applied tax treatment matches the actual operation of the partner-company relationship.