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V0733-16 24 February 2016 · SG de Impuestos sobre el Consumo Criterion in force
IVA · administración pública

Water supply provided by local authorities is subject to VAT even if the consideration is a tax charge

A query was raised regarding whether water supply services provided by local authorities, either directly or through a company, are subject to VAT. The DGT ruled that these activities are subject to the tax, even if the consideration is of a tax nature.

The question raised

Liability of the service provided by City Councils, both directly and when performed through a company.

The DGT's ruling

Public Administrations hold the status of entrepreneur when they carry out business activities on a continuous basis and for consideration. The distribution of water is an activity which, pursuant to Law 37/1992, is always subject to VAT, regardless of whether the consideration is of a tax nature. Therefore, the supply of water, whether provided by City Councils or through a company, must apply the reduced rate of 10%.

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