Key takeaways
- Spain’s ‘use and enjoyment’ VAT rule taxes services where they are actually used, mainly affecting cross-border transactions with non-EU customers.
- 2023 reforms narrow its scope, limiting application in B2B services to certain VAT-exempt sectors like finance, insurance, and leasing.
- For B2C transactions, the rule still applies to intangible services used in Spain, providing greater clarity but ongoing compliance complexity.
In short: Spain's 'use and enjoyment' VAT rule taxes some services where they are used, even when the customer is outside the EU. From 2023, Spain limits the rule. For B2B, it now covers only certain VAT-exempt services, such as finance, insurance and leasing of means of transport. It mainly targets B2C sales.
Does your business operate in Spain? Or are you a non-EU business that buys e-services from Spanish firms? Then you probably already know the ‘use and enjoyment’ VAT rules and their challenges.
The 'use and enjoyment' rule is a VAT tool that taxes certain services where they are used and enjoyed. It lets EU countries override the general place of supply rule in some cases. This mainly applies when the customer is based outside the EU and set criteria are met.
In Spain, the rule was applied widely. This caused problems for Spanish firms that provide services such as e-services, financial and banking services, and leasing of means of transport.
Here is how the rule worked. A Spanish firm might sell one of these services to a customer outside the EU. If the service was actually used in Spain, the place of supply moved from the non-EU country to Spain. Over time, the rule grew wider, and Spanish companies became less competitive.
Spain saw the need to standardise the rule and narrow its scope, so it made changes in 2023. The changes mainly limit the rule for B2B services. The rule now focuses mostly on B2C sales.
For B2B supplies, the use and enjoyment rule now applies only to specific VAT-exempt services. These mainly relate to finance, insurance and leasing of means of transport.
For B2C supplies, the use and enjoyment rule will also cover intangible services sold to non-EU customers when the service is used in Spain. Examples include:
- data processing;
- consultancy services;
- advertising services;
- rental of movable property;
- copyright transfers;
- financial and banking services;
- access to electricity and gas;
- staff supply.
The changes aim to give more legal clarity. They make life simpler for professional service firms with international clients. These firms will no longer have to charge Spanish VAT to foreign companies.
The 2023 changes make the VAT regime clearer. Even so, applying the use and enjoyment rule in specific cases can still be complex.
What law changed the use and enjoyment rule?
The change was made by Article 73 of Law 31/2022, Spain's State Budget Law for 2023. It amended Article 70.Two of the Spanish VAT Law (Law 37/1992). The change has no end date.
The Spanish Tax Agency (AEAT) sums up the reform in two parts:
- B2B: the rule no longer applies to services between businesses in sectors that have the right to deduct input VAT. It stays for sectors without that right, such as financial and insurance services.
- B2C: the rule now covers intangible services to final consumers, so they are taxed where they are used.
The AEAT gives an example. A lawyer established in Spain advises a private client who lives outside the EU. If the client uses the advice in Spain, Spanish VAT applies.
How do you check whether the rule applies to a service?
Start with the normal place of supply rule, then ask whether the use and enjoyment rule moves the service to Spain. These questions help:
- Would the service otherwise be taxed outside the EU? The rule mainly matters in that case.
- Is the customer a business? The rule now applies only in sectors without a right to deduct VAT, such as finance and insurance, and to the rental of means of transport.
- Is the customer a consumer? The rule can apply to intangible services.
- Is the service actually used in Spain? Only then does Spanish VAT apply.
The AEAT says Spain kept the rule for the rental of means of transport to prevent fraud and protect competition in that market.
What does this mean for businesses?
- Spanish service providers with non-EU business clients: services such as consultancy, advertising or data processing are generally no longer subject to Spanish VAT under this rule.
- Financial and insurance businesses: check each cross-border contract, as the rule can still move the place of supply to Spain.
- Suppliers to non-EU consumers: if intangible services are used in Spain, charge Spanish VAT.
For Spanish VAT rates, registration and filing rules, see our Spain VAT guide.
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Frequently asked questions
What is the 'use and enjoyment' VAT rule in Spain?
The 'use and enjoyment' VAT rule ensures that certain services are taxed where they are actually used and enjoyed. It applies mainly when services are provided to non-EU customers but consumed in Spain, shifting the place of taxation from the non-EU country to Spain.
What has changed about the 'use and enjoyment' rule in Spain in 2023?
From 2023, Spain has limited the rule’s application mainly to B2C transactions. For B2B services, it now applies only to certain VAT-exempt sectors such as finance, insurance, and leasing. These changes aim to simplify VAT compliance and enhance competitiveness for Spanish businesses.
Which services are affected by Spain’s 'use and enjoyment' VAT rules?
The rule affects services like consultancy, data processing, advertising, leasing of movable property, banking, and access to electricity and gas. If these services are provided to non-EU customers but used in Spain, Spanish VAT may still apply.
Which law introduced the 2023 change?
Article 73 of Law 31/2022, Spain's State Budget Law for 2023, amended Article 70.Two of the Spanish VAT Law. The change has no end date.
Do Spanish consultants charge VAT to non-EU business clients?
Generally no. Since 2023, the use and enjoyment rule no longer applies to B2B services in sectors with a right to deduct VAT, such as consultancy. It still applies to some sectors, such as financial and insurance services.
Does the use and enjoyment rule still apply to vehicle rental in Spain?
Yes. Spain kept the rule for the rental of means of transport to prevent fraud and protect competition in that market.
Does a Spanish lawyer charge VAT to a private client outside the EU?
Yes, if the client uses the advice in Spain. Since 2023, the rule covers intangible services to final consumers, and the AEAT uses this case as its example.
