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V1303-18 18 May 2018 · SG de Impuestos sobre el Consumo Criterion in force
IVA · entidad de carácter social

Non-profit cultural entities may qualify as social entities if management positions are unpaid

A non-profit association dedicated to musical training inquired whether it could be classified as a social entity to apply VAT exemptions to its cultural services. The Directorate-General for Taxes (DGT) ruled that the fact that the president and secretary receive payment for teaching services does not prevent this classification, provided that their management positions are unpaid and they have no interest in the economic results.

The question raised

Whether the entity can be considered an entity of a social nature for the purposes of Value Added Tax.

The DGT's ruling

For an entity to be of a social nature and for its cultural services to be exempt from VAT, it must lack a profit-making purpose, have management positions held gratuitously without interest in the results, and not favor members or relatives. The gratuitous nature of management positions must comply with the criterion of being administered on an essentially philanthropic basis. The fact that management positions maintain contracts to provide other services (such as a teacher) does not breach the requirement of gratuitous management, provided that the position of president is held gratuitously and without interest in the exploitation.

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