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V2566-25 18 December 2025 · SG de Impuestos sobre el Consumo Criterion in force
IVA · asunción de penalización

Assumption of penalties under telecom contracts exempt from VAT

A telecoms distributor inquired whether payments of penalties to new customers for breaching prior contracts were subject to VAT. The DGT replied that they are not, as there is no act of consumption or consideration for a service.

The question raised

Whether the assumption of said penalty constitutes an operation subject to Value Added Tax.

The DGT's ruling

The assumption of a penalty for the early termination of a contract does not constitute an operation subject to VAT. No act of consumption is identified, nor is there a legal relationship where the payment is the consideration for the supply of goods or the provision of services in favor of the applicant. In the absence of consideration for a taxable operation, the amount paid is not subject to the tax.

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