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V0154-17 24 January 2017 · SG de Impuestos sobre el Consumo Criterion in force
IVA · no sujeción

Irrigation communities must bear VAT costs for irrigation modernisation works

An irrigation community has requested clarification on whether the reverse charge mechanism applies to irrigation modernisation works. The Directorate General for Taxes (DGT) has ruled that, as these works relate to a non-taxable activity, the community does not act as a taxable person and must bear the VAT charged by the supplier.

The question raised

1.- Taxable status of the requesting Irrigation Community.

The DGT's ruling

The operations of irrigation communities for the management and exploitation of water are not subject to VAT. Irrigation modernization works are considered related to said non-taxable activity, as a result of which the community does not act as a taxable person or professional in the acquisition. Consequently, the reverse charge mechanism does not apply, and the supplier must charge the VAT, which the community must bear. VAT incurred on acquisitions intended exclusively for the non-taxable activity shall not be deductible.

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