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V3198-16 8 July 2016 · SG de Impuestos sobre el Consumo Criterion in force
IVA · base imponible

Late payment charges and compensatory interest are exempt from VAT

A communications services company has requested clarification on whether VAT should be applied to bank charges for returned direct debits and late payment interest. The Directorate-General for Taxes (DGT) has ruled that, as these charges are compensatory in nature and do not constitute consideration for a service, they are not subject to VAT.

The question raised

Treatment of such amounts in Value Added Tax.

The DGT's ruling

Expenses for returned direct debits are compensatory in nature and do not constitute consideration for a transaction subject to VAT, as no act of consumption exists. Likewise, late payment interest intended to compensate for the non-payment of invoices, and which does not constitute interest for the deferral of the price, does not form part of the tax base. In these cases, the imposition of the VAT amount is not applicable.

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