Foreign traders often follow the business model consisting in storing goods in a warehouse located in Spain and operated by a third party, like a logistic company, for delivery to their Spanish clients. The sales are normally B2B, that is, the clients are normally other taxable persons, not end users. For instance, a German company sends goods to Spain, which are stored in a warehouse located in Barcelona or Valencia or somewhere else (except the Canaries, Ceuta and Melilla). The warehouse is owned by a logistic company, which handles the goods and delivers them to the Spanish clients following the instructions of the German company. Under this scheme, the orders are received by the German company in Germany and the invoices are issued in Germany and paid into a foreign bank account.
Regarding Value Added Tax (“VAT”), it is clear that the German company would be doing a taxable Intra – Community acquisition of goods in Spain (technically, this is an intra- Community self-sale, since the supplier retains the ownership of the goods dispatched).
However, this transaction would be exempt from VAT because the subsequent sale of the goods to the Spanish client would be a domestic suply of goods in which the tax payer would be the recipient, under the reverse charge mechanism.
According to the criterion of the Spanish Tax Office, a foreign company or entrepreneur is not deemed to have a Permanent Establishment in Spain for VAT purposes if it temporarily storage goods in a warehouse owned and operated by a third party and in which the former company does not have any right of use or lease arrangement. Therefore, the foreign company will be considered a non-established taxable person and any suply of goods done will be taxed in the hands of the Spanish client under the reverse charge mechanism.
When this happens, the intra Community acquisition of goods done by the foreign business when the goods are dispatched and stored in the Spanish warehouse is exempt from VAT. This is because that foreign company would be entitled to get the refund of the input VAT according to the procedure for non-established entrepreneurs. The rationale of the exemption is that it is a non-sense obliging to pay VAT and subsequently be obliged to refund it.
If the clients of the foreign company were consumers, that is, a B2C transaction, then the tax treatment would be completely different.
When the intra-Community acquisition is exempt as explained above, the Spanish Law obliges to appoint a fiscal representative for the purposes of compliance with the VAT obligations even if the taxable persons are not established in Spain. The fact that the non-established entrepreneur has appointed a tax representative has no influence on the application of “reverse charge” of the subsequent suply of goods.
The VAT obligations of companies trading in Spain in the way explained above are limited. Apart from appointing a fiscal representative they have to apply for a Spanish VAT number and for the inclusion in the census of intra Community operators (“VIES”). They also must keep a record of the goods dispatched to Spain, preserve all the documents showing these transactions and submitting the monthly or quarterly (depending on the turnover) recapitulative statement of intra-Community transactions (form 349). Of course, they have to do the Intrastat for statistical purposes.
It is noteworthy to remark that the Law does not impose any formal obligation to the non-established entrepreneur in respect on the suplies that occur after the storage, since such obligations apply to the domestic client.
Regarding the Spanish Corporate Income Tax (“CIT”) it must be noted that almost all Tax Treaties signed by Spain follow the OCDE model. These tax treaties do not consider a Permanent Establishment the use of facilities solely for the purpose of storage, display or delivery of goods or merchandise belonging to the enterprise or the maintenance of a stock of goods or merchandise belonging to the enterprise solely for the purpose of storage, display or delivery.
According to this definition, the activity of the company using the scheme explained above could not be deemed to be done through a Permanent Establishment in Spain, and the profits obtained by said foreign company on his sales in Spain could never be taxed in Spain under the CIT.
However, according to the Law a foreign company operating in Spain through a permanent establishment or, not having a permanent establishment, but performing economic activities in Spain shall be obliged to appoint a fiscal representative for CIT purposes as well.