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An analysis by Flick Gocke Schaumburg, Taxand Germany and Garrigues, Taxand Spain
Although the EU VAT Directive aims to harmonise VAT rules, member states have flexibility in how they implement these rules. This leads to differences in how supplies involving installation are treated for VAT purposes. Under EU law, supplies that include installation or assembly are taxed at the place where the installation occurs (Art. 36). In contrast, German VAT law defines “work supplies” more narrowly and only applies the reverse charge mechanism when the supplier is not established in Germany.
These differences create practical challenges in cross-border situations. For example, when Spanish companies supply and install parts in Germany, or when German companies do the same in Spain, businesses must navigate varying interpretations, rules on fixed establishments, and place-of-supply provisions.
Rainald Vobbe from our German member firm Flick Gocke Schaumburg has published the first of three articles on this topic, which can be read here. The series co-authored with María Teresa Deltell and Carlos Gómez Barrero from Garrigues in Spain, compares German and Spanish VAT approaches under EU law. Part 2 covers Work Supplies under German VAT Law, and Part 3 addresses Supplies with Installation under Spanish VAT Law.
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