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V2314-17 13 September 2017 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IVA · costas judiciales

VAT should not be declared or charged on legal costs in forms 390 and 347

A taxpayer inquired whether the amount of legal costs paid must be declared in forms 390 and 347. The DGT ruled that the payment of legal costs constitutes compensation rather than consideration for a transaction subject to VAT.

The question raised

1st Whether the amount of the costs must be declared in forms 390 and 347.

The DGT's ruling

The payment of legal costs by the losing party constitutes compensation that is not consideration for a transaction subject to tax. Therefore, the imposition of VAT from the winning party to the losing party is not appropriate, nor is the issuance of an invoice for this concept. The lawyer must invoice their services to the winning party, who is the actual recipient of the service, and not to the client. Consequently, the payer of the costs must not include any tax amount in their VAT returns.

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