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V0967-14 7 April 2014 · SG de Impuestos sobre el Consumo Criterion in force
IVA · no sujeción

Municipalities entitled to VAT deduction on waste collection services provided to private companies

A municipality has enquired whether it can deduct VAT on services provided by a Regional Council for waste collection. The DGT has ruled that while the Council's services to the municipality are not subject to VAT, the municipality is entitled to deduct VAT on expenses related to the services it invoices to private companies.

The question raised

Possibility of deducting from the tax incurred by the private entity the tax incurred by the Comarcal Council based on the number of containers on which the City Council provides the service relative to the total taken into account for the invoicing of the Comarcal Council.

The DGT's ruling

The services provided by the Comarcal Council to the City Council are not subject to VAT as they are public functions of a local entity. However, the City Council acts as a taxable person when invoicing collection services to a private entity, which grants it the right to deduct the input tax incurred that is allocated to said taxable operations. The deduction must follow the apportionment rules for entities with dual activity (taxable and non-taxable).

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