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V2656-20 14 August 2020 · SG de Impuestos sobre el Consumo Criterion in force
IVA · suplidos

Insurance premiums paid on behalf of a lessee may qualify as disbursements if requirements are met

A renting company has enquired whether insurance premiums paid on behalf of a lessee (the actual policyholder) can be treated as disbursements to avoid being included in the VAT taxable base. The DGT has ruled that they may only be treated as disbursements if the strict requirements are met: acting on behalf of another, having an express mandate, providing exact justification of the amount, and not deducting the tax.

The question raised

Consideration of insurance premiums paid by the consulting entity on behalf of and representing the lessee as disbursements for Value Added Tax purposes in the second contractual modality described.

The DGT's ruling

For the amounts paid by the lessor on behalf of and for the account of the lessee (the policyholder) to be considered disbursements and not to form part of the VAT taxable base, four conditions must be met: 1) acting on behalf of and for the account of the client, evidenced by an invoice charged to the client; 2) the existence of an express mandate from the client; 3) the amount received must exactly match the expense incurred; and 4) the taxable person must not deduct the tax levied on said expenses. The fact that the reimbursement is made in installments does not prevent them from being considered disbursements if these requirements are met.

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