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A lawyer inquired whether VAT should be applied when collecting legal costs awarded against the losing party. The DGT ruled that the payment of costs constitutes compensation for the winning party rather than consideration for a service, and therefore is not subject to VAT.
This ruling clarifies that legal costs awarded by a court do not constitute a taxable supply of services, ensuring that lawyers do not incorrectly charge VAT on these amounts.
The tax team reviews your specific situation.
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