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V1918-17 19 July 2017 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IVA · derecho de paso

Establishment of a pipeline right of way is subject to VAT but not to Income Tax (IRPF) withholding

A company has requested clarification on whether monthly payments for a temporary pipeline right of way through an adjacent premises are subject to VAT and whether Income Tax (IRPF) withholding must be applied. The Directorate-General for Tax (DGT) ruled that the transaction is subject to VAT as a provision of services, but there is no obligation to withhold Income Tax as it does not constitute a lease of urban property.

The question raised

Taxation of said easement of way for Value Added Tax purposes and subjection to withholding under Personal Income Tax.

The DGT's ruling

The establishment of an easement of way is considered a provision of services subject to VAT, as the owner of the premises acts as a business operator by exploiting a real right to obtain income. However, there is no obligation to apply withholding tax under Personal Income Tax (IRPF) because the income does not derive from the lease or sublease of urban real estate, but rather from an easement of way.

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