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V0153-18 26 January 2018 · SG de Impuestos sobre el Consumo Criterion in force
IVA · exención de iva

VAT exemption cannot be applied to EU-subsidised projects if there is no consumption by the Community

A local council has enquired whether it can apply the VAT exemption available to European Communities to LIFE projects receiving subsidies. The Directorate General for Taxes (DGT) has ruled that if the Community does not acquire goods or services for its own use but instead grants subsidies, no taxable transaction occurs, and therefore the exemption does not apply.

The question raised

Accreditation of the non-deductibility of the tax borne.

The DGT's ruling

For an operation to be subject to VAT, there must be a consumption of goods or services by the payer. If the European Community provides amounts in the form of a subsidy to fulfill purposes of general interest, it does not act as a consumer and there is no provision of services. In that case, the exemption under the Protocol on Privileges and Immunities cannot be applied. Likewise, acquisitions do not benefit from an exemption because they are not purchases made by the Community itself for its official use.

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