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A taxpayer ordered to pay legal costs has requested a VAT refund on the legal fees and costs incurred by the winning party. The DGT ruled that the payment of legal costs constitutes compensation rather than a VAT-taxable transaction between the parties.
This ruling clarifies that legal costs awarded to a winning party are treated as indemnity, preventing the losing party from claiming VAT deductions on those costs.
The tax team reviews your specific situation.
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