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A lawyer has requested clarification on how to tax fees in a legal proceeding where costs are to be paid by a third party. The DGT clarifies that VAT must be charged to the client (the recipient of the service) and that Income Tax (IRPF) is governed by either the accrual or cash basis, depending on the specific professional activity.
This ruling confirms that the obligation to charge VAT lies with the direct recipient of the legal service, regardless of whether the legal costs are ultimately recovered from the opposing party.
The tax team reviews your specific situation.
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