The Spanish General Directorate of Taxes (DGT) has published a tax ruling of 29 May 2019 in which it sets out the different requirements that a transaction must meet in order to apply the use and enjoyment provision under article 70.Two of the Spanish VAT Law, which is the implementation of article 59.a section b of the EU VAT Directive.1

The case in question centered on whether the transfer of certain copyrights by a Spanish entity to another entity established in the US would be within the scope of Spanish VAT on the basis of the use and enjoyment provision. In particular, this question had to be considered in light of the fact that those copyrights would be later transferred to a Dutch entity which would be in charge of the economic exploitation of the copyrights in all the EU Members States (including Spain).

The DGT concludes that the use and enjoyment provision would not apply, taking into account that the direct recipient does not use the services to perform transactions subject to Spanish VAT, even though the subsequent acquirer uses the copyrights to perform transactions in Spain. The important criteria in the mentioned tax ruling is that when analyzing the use and enjoyment provision, the DGT focuses on the formal recipient of the transaction and on the fact that the formal recipient is performing transactions subject to Spanish VAT, not taking into account that at the end of the chain the entity in charge of the economic exploitation of the copyrights is performing activities subject to Spanish VAT.

The judgment does not set new criteria, but it is nevertheless still relevant given its significant implications for the Spanish market, as well as the fact that not all operators are fully aware of such an interpretation of the law.