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V0958-20 20 April 2020 · SG de Impuestos sobre el Consumo Criterion in force
IVA · autoconsumo

Electricity production in an Irrigation Community is subject to VAT, except for common irrigation costs

An Irrigation Community has requested a ruling on whether energy production at a photovoltaic plant constitutes a business activity and how energy supplied to its members or sold to the market is taxed. The DGT has determined that the sale of surplus energy and self-consumption are subject to VAT, whereas the distribution of energy costs for irrigation may be exempt from VAT if it forms part of water management.

The question raised

1. Extension of what was indicated in the binding response of December 10, 2019, tax inquiry V3353-19. In particular, the taxpayer wishes to know whether the production of energy in the photovoltaic plant is considered a business and professional activity for the purposes of Value Added Tax and the taxation of the supplies for consideration of electricity made to the members of the community instead of allocating it to self-consumption.

The DGT's ruling

The production of electricity with the intention of intervening in the market constitutes a business or professional activity subject to VAT. The self-consumption of the produced energy is considered a supply of goods assimilated to a supply for consideration. The sale of surplus electricity to third parties is a supply of goods subject to tax at the general rate of 21%. However, if the energy is used for irrigation and its cost is equitably passed on to the members of the community as a common expense of the water management activity, said operation shall not be subject to VAT.

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