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V4580-16 26 October 2016 · SG de Impuestos sobre el Consumo Criterion in force
IVA · base imponible

Travel cancellation compensation is excluded from the VAT taxable amount

A tour operator has requested clarification on whether cancellation charges and penalties should be included in the VAT taxable amount. The Directorate-General for Taxes (DGT) has ruled that these amounts are not subject to tax, as they do not constitute consideration for a service nor an act of consumption.

The question raised

Exclusion of cancellation charges and penalties from the tax base, in cases of force majeure as well as when such circumstances do not occur.

The DGT's ruling

Amounts received as compensation for breach of contract upon canceling a trip before its commencement are not included in the VAT taxable base. This is because, by their nature and function, they do not constitute consideration or compensation for the supply of goods or the provision of services subject to the tax. As they do not correspond to an act of consumption, tax imposition is not applicable.

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