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A query was raised regarding whether payments made by one irrigation community to another to compensate for infrastructure expenses and depreciation are subject to VAT. The Directorate General for Taxes (DGT) ruled that if such payments stem from water management and use, they do not constitute a taxable transaction.
This ruling provides legal certainty for irrigation communities, ensuring that internal financial adjustments for infrastructure maintenance and depreciation do not trigger VAT liabilities, provided they are directly linked to water management activities.
The tax team reviews your specific situation.
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