Since 2003, the Spanish tax regulations include the so-called ‘effective use or enjoyment’ rule, under the authorization established in Article 59a b), of the Directive 2006/112/EC.
Certain services are considered provided in the territory of application of the Spanish Tax (mainland and Balearic Islands) when, in accordance with the location rules applicable to them, they are not understood to be carried out within the Community, Canary Islands, Ceuta or Melilla, but their effective use or exploitation is carried out in said territory.
The so-called effective use or enjoyment rule applies, among other services, to those of advertising, advisory, audit, law, services provided by consultants, accounting and tax experts, when the recipient is an entrepreneur or a professional acting as such.
In practice, the application of said rule has been particularly complex, due to the way in which the Spanish legislator transposed it into domestic law and also because of the EU and national case-law on that rule. This has led to obvious legal uncertainty, as well as, on some occasions, a breach of the principle of tax neutrality.
With the modification of the Law, the scope of application of the so-called ‘effective use or enjoyment rule’ in transactions carried out between entrepreneurs and professionals (B2B transactions) is significantly reduced.