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V2034-23 12 July 2023 · SG de Impuestos sobre el Consumo Criterion in force
IVA · subvención de capital

A municipal grant for water infrastructure works is not subject to VAT

A City Council inquires whether a capital grant to finance drinking water infrastructure renovation works, provided to a concessionaire, is subject to VAT. The DGT responds that it is not, as it does not constitute consideration for a service nor is it a price-linked subsidy.

The question raised

Whether the payment of said grant is subject to Value Added Tax.

The DGT's ruling

The grant is not subject to VAT due to the absence of a legal relationship involving the exchange of reciprocal considerations between the City Council and the concessionaire. It is also not considered a price-linked subsidy, as it does not determine the existence of an effective consideration for a service provided. Therefore, the amounts do not constitute the consideration for a transaction subject to the tax.

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