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V3236-18 19 December 2018 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · autoconsumo de servicios

Free services to third parties may be subject to VAT due to self-consumption or taxed under Personal Income Tax at their market value

A lawyer inquires whether the free provision of services to friends or family and contingency fees are subject to VAT and Personal Income Tax. The DGT indicates that if the free service is for purposes unrelated to the professional activity, it is not subject to VAT, but if it is for business purposes, it is considered self-consumption subject to the tax.

The question raised

Question raised: Whether your actions are subject to Value Added Tax and whether you must declare any amount for Personal Income Tax.

The DGT's ruling

Regarding VAT, the free provision is not subject to tax if it is carried out for purposes unrelated to the activity and is limited to providing the same service received from third parties without the right to deduction; otherwise, it is self-consumption subject to the tax. Regarding Personal Income Tax, services provided free of charge to third parties must be accounted for as income at their normal market value. Regarding contingency fees, if nothing is received and the lack of consideration is proven, they are considered intended for business purposes and not for self-consumption.

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