Easements for electrical installations will be exempt from VAT

The management of energy infrastructures involves the need to establish rights over third-party land for the deployment of networks. Recently, the Dirección General de Tributos (DGT) has clarified the tax treatment applicable to the establishment of easements, whether overhead or underground, necessary for the transport or distribution of electrical energy.

What the DGT has resolved

The inquiry raised whether the establishment of an easement or the leasing of land for this purpose would be subject to or exempt from VAT. The advisory body has determined that these operations are subject to Value Added Tax (IVA), as they constitute a transfer of use of real estate.

However, the resolution establishes that said operation is exempt from the tax settlement. The legal basis lies in Article 20.One.23º of Law 37/1992 on VAT, which provides for an exemption for operations relating to real rights of enjoyment over land.

What it means for you

This criterion has a direct impact on commercial entities operating in the electricity sector that must negotiate the use of land for the installation of high or medium voltage lines. Although the nature of the operation is a transfer of use (which technically places it within the scope of VAT), the special regulations on exemptions prevail.

For companies managing infrastructure, this implies that the establishment of these easements will not generate an additional tax cost, as the exemption provided for real rights of enjoyment applies.

What should be done

Companies in the process of deploying electrical networks or those that must formalize rights of way over third-party estates should ensure that the technical and legal documentation of the easement complies with the provisions of the Electricity Sector Law. It is necessary to verify that the nature of the right established fits strictly within the definition of a real right of enjoyment to guarantee the application of the exemption. Since each easement agreement may have different contractual nuances, it is recommended to assess the legal structure of each operation to avoid errors in billing or tax settlement.