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V3186-14 27 November 2014 · SG de Impuestos sobre el Consumo Criterion in force
IVA · operaciones exentas

VAT cannot be deducted on acquisitions by an entity performing only exempt transactions

An insurance company has enquired whether it can deduct VAT on services acquired from companies within the European Union. The DGT has ruled that, as the company only carries out exempt insurance transactions, it is not entitled to the deduction.

The question raised

Question posed: Whether said operations generate a right to deduction.

The DGT's ruling

Insurance, reinsurance, and capitalization operations are exempt from VAT pursuant to Law 37/1992. The right to deduction only exists when the goods or services are used in taxable and non-exempt operations. Therefore, an entity whose activity is limited to these exempt operations shall not be able to deduct the input tax incurred in its acquisitions, whether through domestic operations or via the reverse charge mechanism.

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What is published here, applied to a company or a specific case. The first meeting is free.

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