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V1930-18 29 June 2018 · SG de Impuestos sobre el Consumo Criterion in force
IVA · entidad pública empresarial

Public business entities must apply VAT to the full water cycle and issue invoices

A query was raised regarding whether a local public business entity qualifies as a taxable person for VAT purposes when providing water and sanitation services. The Directorate-General for Taxes (DGT) ruled that it does hold this status and must therefore apply the tax and issue invoices.

The question raised

Whether the local public business entity created by the City Council is considered a taxable person or professional for Value Added Tax purposes regarding the provision of water supply and purification services, and whether it must issue an invoice for the provision of said services.

The DGT's ruling

A public business entity is considered a taxable person when it organizes resources to carry out an activity for consideration, assuming risk and uncertainty. Water distribution is an activity always subject to VAT, even if the consideration is of a tax nature. The reduced rate of 10% must be applied to the integrated water cycle (supply, sewerage, and purification). Furthermore, the entity is obliged to issue an invoice for these operations.

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