Foundations must prove their social nature to apply the VAT exemption

The application of the VAT exemption for foundations is not automatic and depends strictly on the nature of the activity performed and the status of the entity. The Directorate General of Taxes (DGT) has specified the necessary criteria for certain social assistance, training, and cultural services to be exempt from this tax.

What the DGT has ruled

The administration has established that the VAT exemption is conditional upon the type of service provided and compliance with specific requirements:

• Social assistance: Services aimed at people in vulnerable situations will be exempt as long as the foundation is an entity of a social nature and the activity falls strictly within social assistance.
• Training: Training courses may only benefit from the exemption if the subjects taught are included in the curricula of the official education system.
• Culture: Shows and cultural manifestations will be exempt only if the foundation meets the legal requirements to be considered a private entity or establishment of a social nature.

What this means for you

If you manage a foundation, you cannot assume that all your activities are exempt from VAT simply because you are a non-profit entity. The classification of your services is decisive. If you carry out training activities that do not fit into the education system, or cultural shows without proving the social nature of the entity, you must apply the corresponding VAT rate. Failure to correctly classify these activities can lead to tax contingencies due to the improper application of exemptions.

What should be done

It is necessary to conduct a detailed analysis of each line of activity within the foundation. It must be verified whether training programs comply with educational regulations and whether the entity's structure allows for the application of the exemption in cultural and social assistance activities. Correctly documenting the social nature of the foundation is fundamental to support the application of the exemption in the event of an inspection.