- Spain’s Supreme Court made a significant ruling on 4 November 2024 regarding the VAT taxable base in transactions between related parties
- The ruling focused on the interpretation of article 79.5 of the Spanish VAT Law which states the taxable base should be the market value or total costs if no comparable transactions exist
- The case involved a lease agreement for a hospital between two related foundations, with a dispute over how to allocate amortisation costs for VAT purposes
- The tax authorities argued for using specific VAT rules for investment goods, contrary to the hospital owner’s preference for accounting and tax rules
- Lower courts and the TEAC supported the tax authorities’ stance, leading to an appeal to the Supreme Court
- The Supreme Court sided with the tax authorities, emphasizing VAT neutrality and the avoidance of distortions from using accounting criteria
- The court highlighted that the interpretation aligns with the Court of Justice of the European Union’s stance on VAT law and deduction adjustments
- The decision underlines that VAT-specific rules should be used over accounting or tax rules when calculating the VAT taxable base
- The Supreme Court set adjustment periods of five years for movable property and 10 years for real estate to align deductions with VAT charged
- This ruling clarifies tax relations between related entities and sets a precedent for future applications of article 79.5 of the Spanish VAT law
Source: bdo.global
Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.
