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V1679-17 29 June 2017 · SG de Impuestos sobre el Consumo Criterion in force
IVA · indemnización

Compensations for goods defects exempt from VAT

A company asked whether payments received from its parent company due to goods defects should be subject to VAT. The DGT responds that as these are damage repairs and not compensation for a service, they do not constitute taxable supply.

The question raised

Liability for Value Added Tax in the event of claiming compensation.

The DGT's ruling

To determine whether compensation is subject to VAT, it must be analyzed whether the amount seeks to indemnify the loss of goods or rights or whether it is the consideration for an operation that constitutes a taxable event. If the amount received by the parent company is intended to repair damages caused by defects in the goods, it is considered compensation and not the consideration for an autonomous service. In this case, the operation is not subject to the tax as it does not constitute an act of consumption.

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