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V1679-22 14 July 2022 · SG de Impuestos sobre el Consumo Criterion in force
IVA · inversión del sujeto pasivo

IVA charges on wastewater plant construction deductible if used for VAT-taxed operations

A local council asks whether IVA paid on building a wastewater treatment plant is deductible. The DGT states that water distribution is a taxable business activity and that, as it involves construction works, the taxpayer's investment applies.

The question raised

Issue raised: Deductibility of the Value Added Tax amounts incurred in the aforementioned execution of works.

The DGT's ruling

The water distribution activity, including the integrated cycle (abstraction, purification, sewerage, and treatment), is a business activity subject to VAT. In the execution of construction works for the treatment plant, the reverse charge mechanism applies. Input tax shall be deductible provided that it is used exclusively for taxable and non-exempt operations, or through a reasonable apportionment method if taxable and non-taxable operations are carried out simultaneously.

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