In brief

The Spanish Central Tax Court states, based on the ECJ case C-349/96, Card Protection Plan, that for leasing contracts accompanied by additional performance or insurance contracts signed together, it is necessary to distinguish (i) the case in which there are multiple services and (ii) the case that has a main operation with other ancillary services. Specifically, in the first case, the operations are perceived as substantive by the customers, so they receive something additional that is useful for its value.

In this particular case, the tax court concluded that the following services are qualified as multiple services:

a) Insurance for civil liability: The tax court concluded that taking into account the content of this insurance (which is the damage caused to a third party with the vehicle) clearly constitutes an additional and substantive supply, with its own utility as perceived by the client.

b) Insurance for own damages in the vehicle: The same conclusion is reached by the tax court taking into account the optional character of this insurance, which is based on the way its price is determined (depending on the accident rates of the client and its separate formalization).

c) Self-insurance: In this type of insurance, the entity assumes the risk of the damages covered thus adding a surcharge.

As far as those types of services should be considered as independent, they should also be considered exempt for VAT purposes, so the VAT paid and affected to exempt activities should not be deductible.

Finally, this analysis is independent of the analysis that has to be made for "flexible" or "short-term" leasing, in which the insurances services are not independently offered and are included in the lease offered to the client. In this case, the tax court considered that the insurance services mentioned are ancillary to the principal transaction, that is, the leasing.