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Spain: Reduced application of “Use and Enjoyment” rule in 2023 

From January 1, 2023, the Spanish VAT Law has been amended with regards to the “Use & Enjoyment rule” which mainly means that most of the services supplied by Spanish businesses to non-EU customers are no longer subject to Spanish VAT. However, Spanish Government is now taking even further measures to restrict the use of this rule.  

Previous “Use and Enjoyment” application 

The ‘Use and Enjoyment’ rule is covered by Article 59 of the EU VAT Directive 2006/112/EC, the Article allows Member States to consider the place of supply for some services differently. Normally, the supply would be situated outside the EU, however, the mentioned rule allows treating the service as being situated within the territory of the Member State. This only applies when the effective use and enjoyment of such a service takes place within the territory of that Member State.  

The option to apply this rule have been effectively used by multiple EU countries, including Spain. Nevertheless, the application of such a rule has been proven to be tricky, as the determining of the correct place of use of a service is in most cases complicated. Moreover, the scope of applying this rule in Spain have been extensively applied throughout the years, leaving the local businesses at certain disadvantage. Namely, Spanish businesses were pushed to charge Spanish VAT when supplying to their non-EU customers, and the recovery process of such VAT was rather ambiguous. 

New scope of the “Use and Enjoyment Rule” in Spain 

Following the discontentment by their local businesses, Spanish Government has taken a very welcomed action to restrict the use of the ‘Use and Enjoyment’ rule. As per the new amendments of the legislation that came in force as of 2023 January 1st, the scope of the said rule was reduced, firstly, by applying the rule only in the case when the recipient of the service is the final consumer of such service.  

When considering the B2B services, the application of rule has been restricted to the following few cases as of 2023:  

  • Leasing the means of transport 
  • Financial services 
  • Insurance services 

However, with the new changes approved by Spanish Government on May 24, 2023, the rule will now seize to apply even to the financial and insurance services, leaving a very small window for its application. 

Timeline of application of the changes 

As the new legislative prevision entered into force as of January 1, 2023, the changes will only affect the services rendered as of that date. The services provided before 2023, however, will be subject to the former provisions, even if the invoicing took place in 2023. 
However, while the Spanish Government is further introducing solutions for more transparent and fair VAT regime, the application of the ‘use and enjoyment’ rule in specific cases can still be complex and challenging. In this regard, do not hesitate to contact us if you have any questions about your VAT matters in Spain. We also invite you to visit Eurotax VAT representation page.  

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