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V1431-20 14 May 2020 · SG de Impuestos sobre el Consumo Criterion in force
IVA · indemnización

Compensation for the impossibility of carrying out urbanisation works is not subject to VAT

A compensation board requested to substitute its obligation to build a communal waste plant with a monetary payment to the local council. The DGT ruled that this payment does not constitute a provision of services, but rather compensation for damages.

The question raised

Taxation under Value Added Tax regarding the substitution of the duty to execute urbanization works by the monetization and receipt of the amount of said duty.

The DGT's ruling

To determine whether compensation is subject to VAT, it must be analyzed whether the amount remunerates an autonomous and individualizable provision of services (act of consumption) or whether it compensates for damages. In this case, the payment for the impossibility of constructing the plant does not constitute consideration for a service for the benefit of the compensation board, but rather compensation not subject to the tax. As there is no transaction for VAT purposes, there is no obligation to issue an invoice.

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