Skip to content
Back to index
V0494-17 24 February 2017 · SG de Impuestos sobre el Consumo Criterion in force
IVA · entrega de bienes

The 10% reduced rate does not apply if material costs exceed 40% of the taxable base

A business owner inquired whether they could split a single project into two separate invoices to apply the 10% reduced rate to services and the 21% standard rate to materials when the latter exceeds the legal threshold. The DGT ruled that if materials exceed 40% of the total, the entire project is classified as a supply of goods and taxed at 21%.

The question raised

Whether, within the same work, it is possible to separate, in two different invoices for the same client, on one hand, the part of the work that does not exceed said limit, and on the other hand, the part of the work that does exceed it, in order to apply the corresponding rate to each differentiated part.

The DGT's ruling

If the cost of the materials provided exceeds 40% of the taxable base, the execution of the work is classified as a supply of goods and is taxed at the general rate of 21%. It is not lawful to differentiate the service component to apply the reduced rate nor to perform an artificial breakdown into several independent works to force such taxation.

Free assessment and quote