The Madrid High Court of Justice has recently published a judgment confirming the application of the use and enjoyment provision set out by the Spanish VAT Law (implementation of Article 59.a section b of the EU VAT Directive, which is optional for EU Member States). The particular relevance of this judgment is clear, given that there are just a few judgments applying this provision.

The case assessed whether marketing services rendered by a Spanish entity to a gambling company established in Gibraltar—which uses those services for business purposes in Spain—would be within the scope of Spanish VAT.

In its judgment, the Madrid High Court of Justice concluded that the services were aimed at developing the Spanish market, even though the recipient of the services were established in Gibraltar. The judgment disregards the current criterion of the Spanish Tax Authorities which requires a direct or indirect link between the marketing services and the services later on supplied by the recipient, which must be subject to Spanish VAT (in the light of EC working paper No 781). Consequently, the Court decided that Spanish VAT must be paid and declared in the Spanish territory by the marketing service provider. It should be noted that Gibraltar entities are not able to recover VAT in Spain, so this VAT entails a cost.