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V3119-20 20 October 2020 · SG de Impuestos sobre el Consumo Criterion in force
IVA · subvención de capital

Council grant for building a home for the elderly is exempt from VAT

A local council asked whether a capital grant given to a concessionary to build a home for the elderly was subject to VAT. The DGT replied that the amount does not constitute consideration for any VAT-liable transaction.

The question raised

Whether the payment of said subsidy is subject to Value Added Tax and, if so, whether the reverse charge mechanism provided for in Article 84.One.2.f) of Law 37/1992 would apply.

The DGT's ruling

The amounts provided by the Administration to finance the construction of a residence do not constitute the effective consideration for a service provided to the City Council. They are also not considered subsidies linked to the price of the operations to be carried out by the concessionaire. Therefore, as there is no legal relationship of exchange of reciprocal benefits, the subsidy is not subject to VAT.

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