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V4481-16 18 October 2016 · SG de Impuestos sobre el Consumo Criterion in force
IVA · compensación económica

Economic compensation for concession tariff reductions is not subject to VAT

A City Council has requested clarification on whether the economic compensation owed to a water concessionaire, resulting from a reduction in user tariffs, is subject to VAT. The Directorate-General for Taxes (DGT) has ruled that this amount does not constitute consideration for a service, but rather an indemnity without a consumption act.

The question raised

Taxability of said economic compensation.

The DGT's ruling

The amount received by the concessionaire due to the tariff reduction does not constitute consideration for an operation subject to the Tax. For taxability to exist, the payment must remunerate a provision of services that involves consumption. In this case, as there is neither an act of consumption nor an autonomous and individualizable provision of services, the compensation must not include VAT.

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