The Spanish Tax Authorities (STA) have recently issued (on November and December 2015) two tax rulings where they clarify their position with respect to the application of the cost sharing VAT exemption for Economic Interest Groupings (Article 132.1.f of the EU VAT Directive). Such tax rulings are classified under numbers V3889-15 and V3645-15 and they were submitted by an insurance company and a hospital, respectively.
The STA analyzes the possibility to apply the exemption to cleaning services with respect to the hospitals, and accounting and advisory services with regards to the insurance company. Based on the ECJ judgments and particularly on caseTaksatorringen , the STA understands that there is a distortion of competition when the VAT exemption itself (and no other circumstances) permits the Economic Interest Groupings to enjoy a privileged position which in practice leads to a restriction of entrance for new competitors.
In addition, the STA interprets that in general terms, the VAT exemption is not applicable to general services such as cleaning, security, laundering, IT, maintenance of buildings, accountancy, tax and legal advisory services, since such supplies are not strictly and directly necessary for undertaking the activity (insurance and healthcare in this case). Finally, the STA states that this specific VAT exemption is not foreseen for general services, since it is not intended to benefit the outsourcing, but rather for reaching the equality of treatment between major players and SME and guarantee the fair competition.
Even though this positioning has been maintained by the STA from 2011 onwards, these tax rulings confirm their reasoning and go in depth on the grounds alleged by the Administration. Anyhow, it should be noted that the application of the VAT exemption should be studied on a case-by-case basis depending on the circumstances of the specific business, as the STA explicitly accept.