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V4684-16 4 November 2016 · SG de Impuestos sobre el Consumo Criterion in force
IVA · subvención

European Community grants do not constitute VAT-taxable transactions nor permit exemptions

A non-profit association has enquired whether funds received from the European Community for a project constitute VAT-taxable transactions and whether exemptions may be applied. The DGT has ruled that, provided the Community does not acquire goods or services for its own benefit, the amounts are grants and do not constitute transactions subject to tax.

The question raised

Accreditation of the non-deductibility of the tax paid.

The DGT's ruling

If the European Community does not acquire goods or services for its own benefit, the amounts provided to the association are subsidies and not transactions subject to VAT. In the absence of a taxable transaction, the exemption under the Protocol on the Privileges and Immunities of the European Communities is not applicable. Likewise, acquisitions made by the association do not benefit from said exemption as they are not purchases made by the Community itself for its official use. The deductibility of input VAT will depend on whether the association carries out a business or professional activity.

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