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V1522-17 15 June 2017 · SG de Impuestos sobre el Consumo Criterion in force
IVA · condena en costas

VAT should not be charged to the party liable for the payment of legal costs due to their compensatory nature

A lawyer inquires whether VAT must be applied when collecting the court costs award imposed on the losing party. The DGT responds that the payment of costs constitutes compensation and not consideration for a service; therefore, there is no tax liability between the winning and losing parties.

The question raised

Issue raised: Tax treatment of the court costs award.

The DGT's ruling

The payment of the court costs award constitutes compensation for the expenses incurred by the winning party and not consideration for services. Consequently, the charging of VAT from the winning party to the losing party is not appropriate, nor is the issuance of an invoice for this purpose. Nevertheless, the professional must invoice their services with VAT to their client (the winning party), who is the true recipient of the service.

Apply this to a real case

What is published here, applied to a company or a specific case. The first meeting is free.

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