Companies with mixed activities must apply pro rata if no separate sectors exist

Determining the right to deduct Value Added Tax (VAT) is one of the most complex aspects for entities engaged in economic activities of a mixed nature. The recent resolution from the Dirección General de Tributos (DGT) establishes the criteria for determining when the pro rata rule must be applied and when the use of separate sectors is mandatory.

What the DGT has resolved

The inquiry addresses the methodology for calculating the deduction capacity of a taxable person who jointly performs operations that grant the right to deduction and others that do not. The tax authority's criterion is based on the entity's operational structure:

• Existence of separate sectors: If the economic activity allows for the identification of clearly separated sectors, an independent deduction regime must be applied to each of them.
• Inexistence of separate sectors: In the event that such sectors do not exist, the entity is obliged to apply the pro rata rule to determine the percentage of deductible VAT.
• Typology of pro rata: The regulations allow this pro rata to be general or special, in accordance with the cases provided for in Law 37/1992 on VAT.

What it means for you

For companies operating with both taxable and exempt activities, this criterion defines the accounting and tax roadmap to avoid errors in tax settlements. The distinction between separate sectors and the application of pro rata is not optional; rather, it depends on the technical reality of the economic activity performed. An incorrect classification of expenses or the activity structure can lead to improper deduction or a lack of deduction that affects the entity's tax burden.

What should be done

It is necessary to analyze the structure of economic activities to determine if they meet the requirements for separate sectors. Correct segmentation allows for more precise VAT management, whereas the absence of it will force the application of the pro rata coefficients established in the VAT Law. It is recommended to evaluate the organization of costs and operations to ensure that the applied deduction regime is the one that legally corresponds to the activity developed.