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V3110-14 18 November 2014 · SG de Impuestos sobre el Consumo Criterion in force
IVA · inversión del sujeto pasivo

Passive investment in cultural services from non-resident companies depends on recipient's entrepreneur status

A municipality asks whether it is subject to VAT and whether passive investment applies when contracting cultural services from a Portuguese company. The DGT responds that passive investment depends on whether the municipality is considered an entrepreneur or professional.

The question raised

Subjectivity of the operation to Value Added Tax and, if positive, whether the reverse charge mechanism occurs. In the event of a reverse charge, whether the tax amount must be withheld and paid to the Public Treasury.

The DGT's ruling

If the city council has the status of an entrepreneur or professional, the reverse charge mechanism applies and the tax must be paid. If it does not have said status, the service is understood to be provided in Spain under special rules and the provider must charge the tax. In both cases, the agreed price is understood to include VAT, and the city council must deduct the tax amount if the reverse charge applies.

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