Country-specific updates: Spain

On 6 October 2022, the Spanish government approved the draft of the 2023 Budget Act, which includes several tax measures, including amendments to the Spanish VAT Law.

The Spanish Government proposes to limit the scope of services falling under the current so called “use and enjoyment rule”. According to this rule, certain services provided to a customer established in a non-European Union State are deemed to be located in Spain and, as a result, subject to Spanish VAT when such services are actually used and enjoyed in the Spanish VAT territory. As from 2023 this rule would not apply, except for:

• Services listed in article 69. Two of the VAT Law (eg. legal services and transfer of intangible assets, etc.) provided to recipients, who are not entrepreneurs or professionals;
• Insurance, reinsurance and capitalization services, as well as financial services, referred to in article 20. One.16º and 18º respectively of the VAT Law, including those services which are not exempt, excluding the leasing of safe deposit boxes" provided to recipients entrepreneurs or professionals; and
• Leasing of means of transport.

The 2023 Budget Act also eliminates the reverse charge mechanism on the following services rendered by non-established entrepreneurs: (i) leasing of immovable property subject to and not exempt from VAT, and (ii) intermediation in the leasing of immovable property.

Finally, the Spanish Government proposes to give more flexibility in order to recover VAT in relation to bad debts.

The draft of the 2023 Budget will be sent to the Congress for debate and approval. If the Spanish Government obtains greenlight, it is expected that these measures will go into effect on 1 January 2023.