Skip to content
Back to index
V0528-19 12 March 2019 · SG de Impuestos sobre el Consumo Criterion in force
IVA · indemnización

Compensation for failure to restore leased premises to original state is not subject to VAT

A commercial property leasing company enquired whether compensation received for failing to return a premises in its original configuration was subject to VAT. The DGT ruled that such an amount does not constitute consideration for a taxable transaction.

The question raised

Value Added Tax treatment of the compensation received by the applicant as compensation for the failure to restore the leased premises to its original configuration.

The DGT's ruling

The compensation for breach of the premises replacement clause does not constitute consideration for any transaction subject to VAT. As its purpose is to indemnify damages and losses resulting from the need to carry out adaptation works on the property, there is no exchange of reciprocal benefits that constitutes a consumption.

Book your free first meeting