The situation is quite different, however, for services provided to consumers in countries outside the EU. The Spanish VAT Law (LIVA) establishes as a condition for a transaction to be subject to VAT that the services provided are effectively used or consumed in Spain (Art. 70.2 LIVA). Otherwise, the transaction is not subject to this tax as it is considered to be an export of services and the invoice would thus be issued without VAT.
At first glance, this rule of effective use of a service in Spain may seem uncontroversial. However, it has caused lengthy debates among academics and practitioners, reports of the EU Commission and constant changes in legal doctrine and the case law, which in practice has meant disputes between business partners and even cases of double taxation due to the lack of VAT refund reciprocity with third countries. For example, legal or tax services offered to companies outside the EU connected to the acquisition of companies or assets in Spain have given rise to particularly heated debates. Moreover, the practical application of this rule, whose original intention was to avoid cases of non-taxation, has been stretched by the Spanish tax authorities beyond its actual wording.
However, the new Spanish State Budget, which usually does not mean good news for taxpayers, has adapted this rule of effective use and severely limited its scope. As of 1 January 2023, only final consumers (i.e. not entrepreneurs) in third countries will be charged VAT on services that are effectively used in Spain, while companies outside the EU are excluded. The new regulation will simplify considerably the purchase of services related to economic investments in Spain, though one exception for entrepreneurs from third countries remains: the purchase of financial or insurance services and the lease of means of transport in Spain.
It should be noted that the new legislation does not apply retroactively. For this reason, the previous legal doctrine and rules will be applied in VAT audits that concern tax years before 2023 that are not statute barred. Nevertheless, we consider the simplification of the Spanish VAT Law to be positive in general, since it undoubtedly offers foreign investors greater legal certainty in a country like Spain, which is always dependent on foreign capital.