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V2949-18 14 November 2018 · SG de Impuestos sobre el Consumo Criterion in force
IVA · deducción de cuotas

Deductibility of VAT on pre-activity expenses if entrepreneurial intent exists

A consultant with no economic activity wishes to plant vineyards to sell grapes and asks whether they can deduct VAT on initial expenses and how future income will be taxed. The DGT responds that VAT on purchases intended for the activity can be deducted from the moment the intention is formed.

The question raised

Deduction of Value Added Tax amounts incurred during the period of improductivity and subsequently, as well as the tax liability on future income obtained.

The DGT's ruling

VAT amounts incurred on acquisitions intended for a business activity are deductible if there is an intention to allocate them to said activity, even before the commencement of taxable operations. If the taxpayer opts for the special regime for agriculture, livestock, and fishing, they may not apply these deductions until the end of the third calendar year of activity, unless they renounce the special regime. Under said special regime, the tax is not levied on the delivery of natural products, but rather a lump-sum compensation is received.

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