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V0847-20 14 April 2020 · SG de Impuestos sobre el Consumo Criterion in force
IVA · exención

Money lending is exempt from VAT even if not performed by a credit institution

A hospitality company has enquired whether interest-bearing cash loans made to customers are exempt from VAT and how they affect its deduction pro rata. The DGT has ruled that the exemption applies regardless of whether the lender is a credit institution, and that inclusion in the pro rata will depend on whether the activity is carried out on a regular or ancillary basis.

The question raised

Exemption from Value Added Tax for loan services provided by the taxpayer and, where applicable, inclusion in the deduction pro rata of the interest collected.

The DGT's ruling

The granting of loans is exempt from VAT pursuant to Article 20.One.18 of Law 37/1992, regardless of whether the lender is a financial institution. To determine whether this income must be included in the deduction pro rata, it must be analyzed whether the activity is habitual or ancillary. Ancillarity requires that the operations be related to the main activity and that, quantitatively, they are not more significant than said activity, although the volume of income is not the sole determining factor.

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