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Practical Handbook VAT 2022

Activities in which the goods and services are to be used

The goods or services must be used in the performance of activities giving rise to the right to deduct, i.e. in carrying out the following transactions:

  1. Transactions carried out in the territory where the tax applies:

    1. Taxable and non-exempt supplies of goods and services.

    2. Supplies of services the value of which is included in the taxable amount of imports of goods.

    3. External transactions exempted for export and similar or relating to free zones, free warehouses and other customs and tax warehouses or arrangements and for being destined for another Member State.

    4. Exempt supplies of goods made by the underlying supplier to the trader or professional facilitating the supply through the digital interface.

    5. Services provided by travel agents which are exempt from tax because they are carried out outside the Community.

  2. Transactions carried out outside the territory which would give rise to the right to deduct if they had been carried out within the territory.


    The services provided by a Spanish lawyer to a French company give rise to a localised transaction in France as the recipient has its place of business in France and is therefore not subject to Spanish VAT .However, the lawyer can deduct the input VAT incurred in the territory where Spanish VAT applies because this service would give rise to the right to deduct if it had been carried out in the territory where the tax applies.

  3. Insurance, banking or financial transactions which would be exempt if they had been carried out in the territory of application of the tax, where the recipient is established outside the Community or where such transactions are directly linked to exports outside the Community and are carried out from the time when the goods are dispatched for that purpose.