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V0324-20 12 February 2020 · SG de Impuestos sobre el Consumo Criterion in force
IVA · justiprecio

VAT should not be included in compulsory purchase compensation if the transaction is subject to tax

An entity has requested clarification on whether the compensation amount for the compulsory purchase of land should include VAT. The DGT has ruled that the compensation represents the economic equivalent of the asset; therefore, VAT must be charged additionally if the supply is subject to tax.

The question raised

Taxability of the described transaction for Value Added Tax purposes.

The DGT's ruling

Compulsory expropriation is considered a supply of goods subject to VAT if the transferor is a taxable person and the land is not exempt. The fair price represents the real and effective value of the asset, and therefore cannot include the tax, as otherwise a reduction in the expropriated party's assets would occur. If the transaction is taxable and not exempt, the transferor must charge VAT in accordance with Article 88 of the VAT Act.

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