Fees for operating bar counters at municipal events are subject to 21% VAT

The legal nature of the contract between a city council and a private individual for the operation of hospitality services at municipal events determines the tax treatment of the amounts paid. Recently, the Dirección General de Tributos (DGT) has clarified the situation regarding fees derived from these concessions or authorizations.

What the DGT has ruled

The ruling analyzes whether the amounts that a private individual must pay to city councils for the granting of spaces to operate bar counters at municipal events are subject to Value Added Tax (IVA). The Administration's criteria establish that the operation of canteens or dining areas has a marked entrepreneurial character.

In accordance with Article 7.8.F)j) of Law 37/1992, the Administration acts in these cases as an entrepreneur or professional. Therefore, regardless of whether the legal link is formalized through a service concession, a service contract, or a domain concession, the operation is subject to the tax. Consequently, the fee paid for the operation of the counter or bar constitutes a provision of services subject to the general rate of 21%.

What this means for you

If you are a natural or legal person intending to be awarded the operation of bar counters at events organized by city councils, you must consider that the cost of the fee will not be a net amount. As it is subject to the general VAT rate, you must add an additional 21% to the value of the fee established in the award or contract.

This criterion eliminates the possibility of applying reduced rates or considering the operation exempt, as the activity of operating canteens is considered a professional economic activity by the public entity granting the space.

What you should do

When participating in tenders or signing concession contracts with local administrations for hospitality services, it is necessary to integrate the impact of VAT into economic viability calculations. It is recommended to evaluate the total cost of the concession, including the 21% VAT, to avoid deviations in the activity's budget.