Are EU and Non-EU Cloud (“electronic services”) Companies Correctly Applying VAT to Non-Taxable Persons In the Canary Islands, Spain?

2015 VAT Rules for Telecommunications, Broadcasting and Electronic Services.

There has been a few changes in how companies and taxable persons must apply VAT on Electronic Services on 1 January 2015, due to Council Implementing Regulation (EU) No 282/2011 of 15 March 2011 with amendments1 which clarifies how to carry out the VAT regulation set forth by The Council Directive 2006/112/EC of 28 November 2006 on The Common System of Value Added Tax2 for telecommunications, broadcasting and electronic services.

The Commission’s Taxation and Customs Union Directorate-General3 summarizes the effect of new rules in the following quote:

“from January 2015, telecommunications, broadcasting and electronic services will always have to be taxed in the country4 where the customer belongs – regardless of whether the customer is a business or consumer – regardless of whether the supplier based in the Community or outside of it.”

Under the new regulation, the supplier of an electronic service have to determine where the customer, a non-taxable person, is established5. To do so it shall presume that the customer (non-taxable person) is established, has his permanent address or usually resides at the place the supplier identifies as such on the basis of two items of non-contradictory evidence6 from the any of the following: (a) billing address, (b) the IP address or any method of geolocation, (c) the billing address of the customer held by the bank used for payment, (d) the Mobile Country Code (MCC) of the International Mobile Subscriber Identity (IMSI) (e) the location of the fixed land line through which the service is received, or (f) other commercially relevant information7.


Is Cloud Storage Supplied to a Customer in the Canary Islands Subject to VAT?

VAT rules for telecommunications, broadcasting and electronic services demand that Cloud Storage Services, an electronic service8, supplied to a customer be subject to VAT at the customer’s permanent address.

Although the Canary Islands belong to the EU, The VAT Directive explicitly leaves them outside of scope of VAT9, giving them the Status of a Third Territory (equal to a Third Country Status for a geographic unit that does not conform politically to a country) and more importantly not subject VAT.

Under current EU regulation, electronic services, such as Cloud Storage, rendered to a customer (non-taxable person) who has his permanent address in the Canary Island are NOT subject to VAT. Subject to the supplier being able to get (with or without the help of the customer) at least two items non-contradictory evidence7 that corroborate that the customer’s permanent address is actually at the Canary Islands.


  1. Referred as “The VAT Implementing Regulation.” 
  2. Referred as “The VAT Directive.” 
  3. Commission’s Taxation and Customs Union Directorate-General publication “VAT Telecom, Telecommunications, broadcasting & electronic services, rules for these services changed on 1 January 2015.” 
  4. The term country used with the meanings of VAT country and territory. A generalization used because in the EU there are few VAT territories. 
  5. The VAT Directive, Article 58.(c).
    Article 58.(c) 
  6. The VAT Implementing Regulation, Article 24b.(d).Article 24b.(d) 
  7. The VAT Implementing Regulation, Article 24f.(d).Article 24b.(d) 
  8. The VAT Implementing Regulation, Annex I.(1).(d) to its Article 7. Annex I to Article 7 
  9. The VAT Directive, Article 5.(1) and (2), Article 6.1.(b).Article 5.(1) and (2), Article 6.1.(b) 

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