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V1528-20 21 May 2020 · SG de Impuestos sobre el Consumo Criterion in force
IVA · renting

Renting insurance may be a single supply subject to VAT if terms cannot be negotiated

A renting company sought clarification on whether billing insurance to clients constitutes an exempt operation or part of the rental service. The DGT has ruled that if the client cannot choose the insurer or negotiate coverage, it is a single supply subject to VAT; however, if the services are independent and the exact cost is recharged, it is exempt.

The question raised

Taxation of the operation for Value Added Tax and deductibility of the Value Added Tax amounts incurred by the applicant in connection with the maintenance or repair of the damaged vehicles.

The DGT's ruling

If the client does not have the authority to choose the insurer or negotiate the coverage, the insurance and the renting constitute a single supply subject to VAT. If the supplies are independent, the rebilling of the exact cost of the insurance is exempt. If an amount different from the exact cost is invoiced (with a margin), the operation shall be subject to VAT. The deductibility of the input VAT depends on whether the operations carried out are taxable and not exempt, applying the pro rata if applicable.

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