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V0316-16 27 January 2016 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · entidad parcialmente exenta

Non-commercial association income exempt if not from economic activity

A non-profit association inquires about tax exemptions from Corporate Tax and VAT on its income. The DGT responds that income is exempt if it arises from its statutory purpose and not from economic activity, and that member services may be VAT-exempt under certain conditions.

The question raised

1) Whether the income derived from the activities carried out by the applicant would be exempt from Corporate Income Tax, and if so, how the taxable base of said Tax would be determined, both before and after its declaration as a public utility.

The DGT's ruling

In Corporate Income Tax, income is exempt if it arises from the specific object or purpose and does not derive from an economic activity. If the entity carries out economic activities, such income shall be subject to tax. In VAT, benefits provided to members may be exempt if they are for purposes of collective interest and do not involve consideration other than statutory membership fees. If there are both taxable and exempt operations, the pro rata rule must be applied for the deduction of input tax.

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