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V2600-14 3 October 2014 · SG de Impuestos sobre el Consumo Criterion in force
IVA · inversión del sujeto pasivo

No liability for passive investment where water community acts as entrepreneur

A water users' association consults whether it must register as promoter with IAE and whether passive investment applies in VAT. The DGT concludes that no IAE registration is required if the barrage is for private use and that passive investment does not apply because the community does not act as an entrepreneur in this activity.

The question raised

Application of the reverse charge mechanism contained in Article 84.One.2, letter f), of Law 37/1992 and registration in the Tax on Economic Activities as a promoter thereof.

The DGT's ruling

Regarding the IAE, there is no economic activity if the construction of the reservoir is not intended for disposal to third parties. Regarding VAT, the operations of irrigation communities for the management and use of water are not subject to the tax. As it is not a taxable activity, the community does not act as a businessman or professional and the reverse charge mechanism does not apply, meaning the builder must charge the tax.

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