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V2449-14 18 September 2014 · SG de Impuestos sobre el Consumo Criterion in force
IVA · costas judiciales

VAT on legal costs cannot be passed on to the losing party

A query was raised regarding whether the party ordered to pay legal costs should receive an invoice including VAT for the winning party's fees. The DGT ruled that the payment of legal costs constitutes compensation and does not constitute a VAT-taxable transaction between the parties to the proceedings.

The question raised

Appropriateness of passing on the aforementioned fees to the losing party.

The DGT's ruling

The payment of legal costs is compensation for expenses incurred by the prevailing party and does not constitute consideration for services. Therefore, the passing on of VAT and the issuance of an invoice by the prevailing party to the losing party are not applicable. The lawyer must invoice their services to the prevailing party, who is the true recipient of the service. The losing party must pay the total amount determined judicially, including the VAT that already taxed the original service.

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