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A local council consulted whether the transfer of plots by a company to settle a contractual penalty was subject to VAT. The DGT ruled that the transaction constitutes a supply of goods subject to tax and that the taxpayer is the company returning the plots.
This ruling clarifies that using land to settle contractual penalties is treated as a taxable supply of goods, identifying the transferring entity as the person liable for VAT.
The tax team reviews your specific situation.
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