A more reasonable use and enjoyment rule leads Spain’s VAT developments for 2023


In the last days of the year, a large number of regulations of all kinds are always approved and 2022 was no exception. In the case of Spain, the General State Budget Law for 2023 was published on December 24, which includes some changes that will probably have a significant impact on VAT.

Just a few days later, the Spanish government again implemented a series of changes; in this case, mainly referring to the use of reduced rates for certain supplies of goods and services.

The use and enjoyment rule

Perhaps the most significant change under the General State Budget Law for 2023 is the modification of the so-called use and enjoyment rule. The application of this rule has been a headache for Spanish companies in recent years, because its scope of application has expanded significantly over time and it has been applied in a large number of situations, making Spanish companies uncompetitive in many cases.

From January 1 2023, this rule will be greatly reduced. The main modification is that for most supplies of services, the rule will only apply when the recipient is a final consumer. In other words, the use and enjoyment rule will apply to B2C cases, leaving most B2B services outside the scope of the rule. In B2B cases, it will only apply to certain financial services, as well as the leasing of means of transport.

The use and enjoyment rule has therefore been significantly reduced and no longer applies to the vast majority of B2B services. This is undoubtedly a change that will be very well received by Spanish taxable persons, which in many cases were forced to charge Spanish VAT to foreign companies, with the complexity that this entails.

Despite the modifications introduced in the application of this rule, in those few cases in which it continues to apply, it will still be necessary to determine what is meant by “use and enjoy” a service in Spain. This has proven to be a complicated task in many cases.

Other significant changes

The above is not the only significant VAT change introduced in the General State Budget Law for 2023 in Spain. Among a number of others, the modifications approved in relation to the process for recovering VAT on bad debts are worthy of special mention.

As is well known, this process in Spain is complicated, and subject to a large number of formal and time requirements. However, from January 1 2023, some of these requirements have been relaxed; for example:

  • The insolvency of the recipient of the transactions may have been declared in any EU member state, not necessarily in Spain;

  • The procedure by which payment has been claimed from the debtor does not compulsorily have to be before a court or a notary, but can be performed by any other means that is sufficiently reliable;

  • The timing for amending the tax base is extended to six months; and

  • The quantitative limit for making a claim in the case of a B2C transaction is reduced from €300 (about $320) to €50.

The last important change introduced in the General State Budget Law refers to the non-application of the reverse charge rule in cases of exempt transactions carried out in favour of a facilitating platform in transactions carried out in the field of e-commerce operations and in cases of leasing (and its intermediation) of real estate carried out by entities not established in Spanish territory. This last measure is taken in relation to the Court of Justice of the EU’s ruling in the Titanium case (C-931/19).

In addition to these amendments included in the General State Budget Law, just two days before the end of 2022, the Spanish government approved another series of rules affecting VAT. These include the application of the 0% rate to the supply of certain basic foodstuffs. This measure will automatically cease to apply as of May 2023 if the inflation rate falls below 5.5%.

Some of the measures approved will serve to make Spanish companies more competitive. Particularly important is the modification of the use and enjoyment rule, the application of which will be drastically reduced as of 2023.

This measure was necessary because, for years, Spanish companies had been in a very complicated situation every time they had to decide whether the rule was applicable, because there was not a uniform criterion for its application. Any change that provides legal certainty is to be welcomed and this one, a priori, seems to be going in the right direction.

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