VAT on partner services: the key is independence versus subordination

The nature of the relationship between a partner and their company is a critical point for the correct application of Value Added Tax (IVA). Recently, the Dirección General de Tributos (DGT) has clarified how VAT liability should be analyzed when a professional provides services to the entity of which they are a member.

What the DGT has ruled

The inquiry asks whether professional services provided by a partner to their company are subject to VAT. The DGT has determined that the key lies in distinguishing whether the partner acts independently or if there is a relationship of labor subordination. For this analysis, the administration requires the assessment of specific elements:

• Organization of resources: Whether the professional organizes their own means to provide the service.
• Organizational criteria: Whether the provider is subject to the guidelines and organization of the company.
• Economic risk: Whether the remuneration depends on results and whether the professional bears the risk of their activity.
• Responsibility: The degree of responsibility towards third parties assumed by the professional.

If the partner operates independently, without subordination and assuming their own risk, the activity will be subject to VAT in accordance with Law 37/1992 and Directive 2006/112/EC. Conversely, if subordination exists, the company assumes the resources and responsibility, and the partner lacks economic risk, there will be no tax liability.

What this means for you

For companies, the classification of this relationship is fundamental, as it determines whether the invoices issued by the partner must include the tax. Incorrect classification could lead to tax contingencies. For the professional who is a partner in an entity, it is necessary to verify whether their activity meets the requirements of independence to know whether they must pay VAT or if their relationship falls under a regime of subordination.

What should be done

It is necessary to analyze the material reality of the provision of services. The contractual form is not enough; the real working conditions, the management of own resources, and autonomy in decision-making must be documented. Each situation presents particularities that require a detailed analysis to ensure compliance with current regulations.