School transport companies do not need to issue invoices for public contributions

Companies dedicated to school transport services that receive funding from Public Administrations have received a relevant clarification regarding their tax treatment in Value Added Tax (IVA). The main issue was to determine whether such public contributions should be subject to an invoice and what the nature of the operation is.

What the DGT has resolved

The Dirección General de Tributos (DGT) has determined that contributions from Public Administrations intended to finance school transport services do not constitute subsidies linked to price nor consideration subject to IVA. The criterion is based on the fact that these contributions do not create a distortion of competition.

In this sense, as they are not operations subject to the tax, the providing entity is not obliged to issue an invoice to justify the receipt of such amounts, although it must use other supporting documents according to current regulations. However, the resolution clearly distinguishes between public funding and charges to users: in cases of non-mandatory transport, the amounts paid by students are considered consideration subject to IVA at the reduced rate of 10%.

What it means for you

If your company manages school transport services and receives public funds, this criterion simplifies the documentary management of state funding. You will not have to issue invoices for the portion of the amount covered by the Administration, as there is no provision of services by the company to the public entity that should be taxed.

Regarding deduction capacity, the resolution indicates that the entity may deduct the totality of the IVA incurred in its activities as long as it carries out exclusively taxable and non-exempt operations. It is fundamental to correctly distinguish between the part of the activity financed by the Administration and the part charged directly to families to apply the correct tax rate.

What should be done

It is necessary to review billing models and accounting to ensure that public contributions are recorded correctly without the issuance of IVA invoices. Likewise, it must be verified that the amount charged to students for non-mandatory services is invoiced at the reduced rate of 10%, clearly separating both income flows to avoid errors in the tax settlement and in the management of the corresponding deductions.