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V3984-15 15 December 2015 · SG de Impuestos sobre el Consumo Criterion in force
IVA · base imponible

Re-invoiced redundancy payments do not constitute VAT taxable base if they represent the exact cost

A company has enquired whether a redundancy payment, which it pays and subsequently re-invoices to the transferring company, should be subject to VAT. The DGT has ruled that the tax should not be applied, provided that only the exact cost of the redundancy payment is invoiced.

The question raised

Treatment of the payment of severance pay in Value Added Tax.

The DGT's ruling

Payments for refactured severance pay have an indemnification nature and do not constitute consideration for services, and therefore do not form part of the VAT taxable base. However, if the invoiced amount exceeds the cost of the severance pay or includes operating or financial margins, such amounts shall form part of the taxable base as they are credits derived from the provision.

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