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V0850-20 14 April 2020 · SG de Impuestos sobre el Consumo Criterion in force
IVA · prorrata de deducción

Subordinated loan interest may be excluded from VAT pro rata if deemed ancillary transactions

A holding company sought clarification on whether interest from a subordinated loan should be included in the calculation of its VAT deduction pro rata. The DGT explains that while granting loans can constitute an economic activity, their inclusion in the pro rata depends on whether they are classified as ancillary or non-habitual transactions.

The question raised

Whether the returns obtained from subordinated loans must be included in the taxpayer's pro rata deduction percentage for Value Added Tax purposes.

The DGT's ruling

For loan interest to be included in the pro rata, the financial activity must be principal and not ancillary. Ancillarity is determined by two requirements: a qualitative one, based on whether the operation involves a very limited use of goods or services subject to VAT, and a quantitative one, regarding whether the operation is more significant than the principal activity. The fact that financial income is higher than that of the principal activity does not in itself exclude it from being considered an ancillary operation.

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