The Spanish Supreme Court has recently issued its judgment (Number 455/2019 of 26 February 2019) in a case which concerned the question of whether or not there are supplies of services between the parties involved in a gambling business — where a bar or restaurant performs any supply to the gambling entity through the utilization of space in their premises. These supplies — if any — would be VAT exempt as gambling services.   

Until now, it was common that entities involved in such a business (owners of establishments and gambling operators) acted through a joint business exploitation contract. Thus, they considered that there were not transactions between the parties, but rather a single gambling supply to the clients performed by the gambling entity (subject and VAT exempt). The parties would share the gains of the business under the joint business contract, but without considering that there were supplies between them for VAT purposes.  

However, in this judgment the Supreme Court states that:  

i. There is a service rendered by the owner of the establishment for renting a space to the gambling entity (subject and not VAT exempted); and  
ii. There is an additional service undertaken by the gambling entity to final consumers (subject and VAT exempted).  

This conclusion implies that the owner of the establishment should charge Spanish VAT to the gambling entity, which in turn cannot be recovered due to the limitation of deduction in light of the exemption of gambling services. This conclusion highlights the necessity to analyze and possibly review the structures that have been implemented in the past according to the previous approach.