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V0102-14 20 January 2014 · SG de Impuestos sobre el Consumo Criterion in force
IVA · base imponible

Cash insurance claim settlements are not subject to VAT

An insurance company has requested clarification on whether cash settlements paid to cover repair costs for claims are subject to VAT. The Directorate General for Taxes (DGT) has ruled that these amounts do not constitute consideration for services, but are rather compensation for damages, and therefore VAT should not be applied.

The question raised

Subjectivity of the compensation paid.

The DGT's ruling

The amounts paid by an insurer to reimburse repair costs for a loss are considered compensation. As they do not constitute consideration or compensation for the supply of goods or services, they do not form part of the VAT taxable base. Therefore, the tax should not be charged upon payment of such amounts.

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