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V2975-17 16 November 2017 · SG de Impuestos sobre el Consumo Criterion in force
IVA · subvención

European Community grants are not subject to VAT nor do they allow for exemptions

A foundation has requested clarification on whether funds received from the European Community for an environmental project constitute a taxable supply of services and whether exemptions can be applied. The DGT ruled that if the Community does not acquire goods or services for its own benefit, the amounts are classified as grants and do not constitute transactions subject to VAT.

The question raised

Accreditation of the non-deductibility of the tax paid.

The DGT's ruling

If the European Community does not acquire goods or services for its own benefit, the amounts provided to the foundation are subsidies and not a provision of services. As there is no transaction subject to VAT, the exemption under the Protocol on the Privileges and Immunities of the European Communities is not applicable. Likewise, the foundation's acquisitions do not benefit from said exemption because they are not purchases made by the Community itself for its official use. The deductibility of input VAT will depend on whether the foundation carries out a business or professional activity.

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