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V4498-16 18 October 2016 · SG de Impuestos sobre el Consumo Criterion in force
IVA · ciclo integral del agua

Potable water supply and sanitation by a Consortium to local councils taxed at 10% VAT

A local council has requested clarification on the VAT rate applicable to invoices issued by a Consortium for potable water supply services. The Directorate-General for Taxes (DGT) has ruled that these operations are subject to VAT and must apply the reduced rate of 10%.

The question raised

Tax rate applicable to the invoice issued by the Consortium to the city councils to which it invoices for the concept of consortium-based provision of drinking water supply services.

The DGT's ruling

Public Administrations are considered entrepreneurs when they carry out business activities for consideration, such as the distribution of water. The supply of drinking water and sanitation are part of the integrated water cycle and are subject to VAT. The reduced rate of 10% applies if the water is suitable for human or animal consumption or irrigation, or if it concerns sewer cleaning services and wastewater treatment.

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