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V0497-20 27 February 2020 · SG de Impuestos sobre el Consumo Criterion in force
IVA · distribución de agua

Water distribution and water charges are VAT subject, allowing deduction of paid fees

A public entity asked whether water supply and water usage charges, real or potential, were subject to VAT and whether it could deduct VAT paid on sanitation services. The DGT responded that water distribution is always subject to VAT and that deduction is possible under legal requirements.

The question raised

Whether the water supply for which the aforementioned levy is paid is subject to Value Added Tax. Deductibility of the Value Added Tax amounts incurred by the consultant.

The DGT's ruling

Water distribution is a business activity subject to VAT, including the integrated cycle (abstraction, purification, sewerage, etc.) and its associated fees. The water use levy constitutes consideration that is subject to and not exempt from this tax. The amounts incurred by the entity are deductible if they are allocated to taxable and non-exempt operations, applying a reasonable and homogeneous imputation criterion if operations are simultaneously taxable and non-taxable.

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