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V3722-16 5 September 2016 · SG de Impuestos sobre el Consumo Criterion in force
IVA · derecho a la deducción

VAT on wastewater treatment plant works is non-deductible if sanitation services are not subject to tax

A local council has enquired whether it can deduct VAT on improvement works carried out at wastewater treatment plants. The Directorate-General for Taxes (DGT) has ruled that if the sanitation service is provided without consideration or via taxes (of a fiscal nature) and is separate from the water supply, the operation is not subject to VAT and, therefore, no right to deduction exists.

The question raised

Possibility of deducting the input tax incurred as a consequence of the execution of the aforementioned works.

The DGT's ruling

Public Administrations are not subject to VAT on services performed without consideration or through consideration of a tax nature. Wastewater sanitation services, when performed separately from the supply and distribution of water, are not subject to the tax. Consequently, the City Council cannot deduct the input tax incurred for the works if these are intended for non-taxable operations, pursuant to Article 94 of Law 37/1992.

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