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V2939-23 3 November 2023 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · actividad económica

Managing a municipal dog pound via agreement may constitute an economic activity subject to CIT and VAT

A non-profit association has enquired whether managing a municipal dog pound through an agreement with a local council constitutes an economic activity and how it should be taxed. The DGT indicates that if there is an organisation of own resources to provide the service, the subsidy and the transfer of assets will be subject to Corporate Income Tax and VAT.

The question raised

1. Is the service provided by the association considered an economic activity?

The DGT's ruling

The management of the kennel appears to constitute an economic activity as it involves the organization of material and human resources on one's own account. In that case, the annual subsidy and the income from the free provision of real estate and movable property shall be subject to and not exempt from Corporate Income Tax. Regarding VAT, if the financial contribution is considered linked to the price of the services, it shall form part of the taxable base; if it is to finance the fixed structure, it shall not be subject to tax.

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