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V3065-23 23 November 2023 · SG de Impuestos sobre el Consumo Criterion in force
IVA · contraprestación

Transfers to fund sanitation infrastructure may not be subject to VAT

A mixed-economy company has requested a ruling on whether transfers received to fund sanitation infrastructure are subject to VAT. The Directorate General for Taxes (DGT) has ruled that, as there is no legal relationship involving an exchange of consideration, these amounts do not constitute consideration or subsidies linked to the price.

The question raised

Whether the payment of said monetary transfers is subject to Value Added Tax and, where applicable, whether it affects the deductibility of the tax amounts incurred by the requesting entity.

The DGT's ruling

Monetary transfers to finance infrastructure expenditures are not subject to VAT if there is no legal relationship between the parties in which reciprocal considerations are exchanged. As they do not constitute consideration for a service nor subsidies linked to the price, they are not considered taxable operations. If the entity carries out exclusively taxable and non-exempt operations, it may deduct the input VAT incurred on its acquisitions.

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