Use of a Warehouse in Spain for the Sale of Goods by Foreign Companies: Cash-Flow Optimization

12.2010

A non-Spanish company (e.g., SuperLogistics GmbH) wishing to participate in the Spanish market without establishing a subsidiary or branch may use a warehouse located in Spain to carry out its operations. This structure can considerably reduce the costs associated with purchasing or selling goods in Spain, while also increasing satisfaction for Spanish end customers by making the goods available to them within Spanish territory.

In this example, a foreign company sells goods to another foreign company for subsequent resale to a Spanish customer. All such sales will be subject to Spanish VAT, as the goods sold originate from within Spanish territory, given that they are stored in a warehouse located in Spain.

A first option would be to use a “call-off stock” arrangement, through which SuperLogistics uses a warehouse in Spain for logistical purposes, storing goods purchased or transferred to Spain without incurring the cost of a lease. In this case, the warehouse may belong either to the client company (the future purchaser of the goods) or to a logistics provider that merely manages the inflow and outflow of the goods. The main advantage of this option is that SuperLogistics does not pay rent (only warehouse logistics costs) and is not considered established in Spain for VAT purposes.

The simplest alternative is for SuperLogistics’ suppliers to transport their goods directly to the warehouse and leave them there. Once SuperLogistics purchases the goods, the foreign supplier must issue an invoice using its Spanish VAT identification number (since the goods are stored in Spain) to the Spanish VAT number of SuperLogistics. If the supplier is a foreign company not established in Spain for VAT purposes, the invoice will be issued without Spanish VAT, and SuperLogistics must account for VAT under the reverse charge mechanism.

Likewise, the invoices issued by SuperLogistics to its Spanish customer will not include VAT, since SuperLogistics is not established for Spanish VAT purposes. The Spanish customer receiving the invoice must again account for VAT under the reverse charge mechanism. As can be seen, throughout this structure—and although SuperLogistics will be required to file the relevant periodic VAT returns—there will be no input VAT for SuperLogistics, nor for the Spanish customer.

The drawback of this structure arises when SuperLogistics has suppliers that are Spanish or foreign but established in Spain. In such cases, SuperLogistics will receive invoices including VAT, which can only be recovered in the following year.

For this latter scenario, there is a second option that involves becoming established for VAT purposes in Spain. This requires leasing a warehouse where a specific rented area is contractually defined. The only difference from the previously described structure is that SuperLogistics’ invoices to its Spanish customer must now include Spanish VAT. In this case, SuperLogistics can deduct input VAT from output VAT, and as output VAT will usually exceed input VAT, there will no longer be an issue with delayed VAT recovery. However, for the final customer, this structure has the disadvantage of having to advance VAT, which may take time to be refunded.

It should be recalled that the Spanish tax authorities are extremely formalistic regarding invoicing requirements, often using any formal defect as grounds to delay a VAT refund or to deny the deductibility of input VAT. For this reason, the use of a warehouse in Spain should be carefully planned, with a detailed assessment of potential risks.

++ Article originally published in German in the magazine “Economía” (December 2010), issued by the German Chamber of Commerce in Spain ++