Foundations may join the VAT group of entities regime

The possibility of non-profit entities being part of group tax structures has been clarified by the Tax Administration. In a recent binding ruling, the scope of integrating foundations into the special regime for a group of entities under Value Added Tax (IVA) has been determined.

What the DGT has ruled

The Dirección General de Tributos (DGT) establishes that a foundation can hold the status of a dependent entity for IVA purposes, provided it meets the condition of being a businessperson or professional. For said foundation to be included in the special regime for a group of entities, it must prove the existence of the financial, economic, and organizational links required by Law 37/1992.

The technical criterion emphasizes that the legal nature of the foundation does not prevent its participation in this regime, as long as its economic activity is what determines its status as a taxable person for the tax. Likewise, it is noted that the option for this regime must be formally agreed upon by the governing bodies of the entities before the start of the calendar year.

What it means for you

For parent companies managing groups of entities, this resolution expands the possibilities for optimizing VAT management. If an affiliated foundation carries out economic activities that qualify it as a businessperson or professional, it can be integrated into the group structure, including the advanced modality.

This integration allows for the centralization of tax management and the application of the offsetting and settlement rules specific to the group regime, provided that the levels of affiliation required by current regulations are maintained.

What should be done

Entities wishing to take advantage of this possibility should take the following actions:

• Verify business status: Check that the foundation carries out activities that grant it the status of a businessperson or professional for IVA purposes.
• Evaluate affiliation: Analyze whether the requirements for financial, economic, and organizational control regarding the parent entity are met.
• Formalize the agreement: Ensure that the governing bodies of both the foundation and the parent company agree on the option for the regime before the end of the current fiscal year.