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A local council has enquired whether an annual subsidy provided to cover the deficit of a municipal transport concession is subject to VAT. The DGT has ruled that, as there is no distortion of competition, the contribution does not constitute a price-linked subsidy or consideration subject to the tax.
This ruling clarifies that public subsidies intended to cover operational deficits in public service concessions, provided they do not distort competition, fall outside the scope of VAT as they are not considered consideration for a service.
The tax team reviews your specific situation.
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