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V3218-15 21 October 2015 · SG de Impuestos sobre el Consumo Criterion in force
IVA · entrega de bienes

Manufacturing a product using client-supplied raw materials may constitute a service provision

A company sought clarification on whether manufacturing a product using alcohol supplied by a Polish client constitutes a supply of goods or a provision of services. The DGT indicates that if the materials provided by the entrepreneur constitute only a small part of the final product, it is classified as a provision of services.

The question raised

Classification of the transaction as a supply of goods or a provision of services and, where applicable, its liability for Value Added Tax.

The DGT's ruling

The classification depends on the importance of the materials provided by each party. If the entrepreneur provides all the materials or those of the client are insignificant, it is a supply of goods. If the client provides the materials or those of the entrepreneur are a small part of the final product, it is a provision of services. In the specific case, if the client's raw material and the entrepreneur's additive represent similar parts of the final value, it would be understood as a provision of services.

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