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V1340-23 18 May 2023 · SG de Impuestos sobre el Consumo Criterion in force
IVA · exacción sustitutoria

Replacement charge for water tax exempt from VAT; infrastructure works are not

A public entity inquired whether the replacement charge for water tax and pipe and drainage works are subject to VAT. The DGT determines that the replacement charge is not subject to VAT, but infrastructure works are.

The question raised

Whether the substitute levy for the water fee intended to partially finance the construction and operation of hydraulic infrastructures is subject to Value Added Tax. VAT liability for the construction works of the water pumping pipe and the capacity improvement of the brine collector executed by the taxpayer for the benefit of the entity receiving them. Deductibility of the Value Added Tax amounts incurred by the taxpayer relating to the aforementioned construction works.

The DGT's ruling

The substitute levy for the water fee is not subject to VAT as it is not considered a business operation nor is it included within the scope of Article 7.8. F).b) of Law 37/1992. Conversely, the execution of construction works for pipes and collectors for a third party constitutes a provision of services subject to the tax at the general rate. Regarding deduction, the entity may deduct the input tax according to a reasonable and homogeneous imputation criterion if it simultaneously carries out taxable and non-taxable operations.

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