State-owned property concessions with catering services will have a portion of the fee subject to VAT

The nature of fees derived from state-owned property concessions has raised doubts regarding their treatment under Value Added Tax (IVA). Recently, the Directorate General of Taxes (DGT) has clarified how the tax liability must be broken down when the concession is not limited solely to the use of space, but also includes the provision of specific catering services.

What the DGT has resolved

The ruling establishes a clear distinction based on the activity carried out by the Public Administration within the framework of the concession. According to the DGT's criteria, the tax treatment is divided into two blocks:

• Transfer of space: The portion of the fee corresponding to the transfer of state-owned space is not subject to VAT, as in this case, the Administration does not act as an entrepreneur or professional.
• Catering services: The portion of the fee corresponding to the operation of canteens, dining rooms, or bars is subject to VAT. In this case, the Administration acts in the capacity of an entrepreneur or professional by providing said services.

To determine which part of the fee must be taxed, the regulations require that the taxable base for each concept be determined in proportion to the market value of the services provided, in accordance with Law 37/1992 on VAT and Law 9/2017 on Public Sector Contracts.

What this means for you

If your company is the successful bidder for a state-owned property concession that integrates catering services, your cost management and invoicing must adapt to this criterion. This implies that you will not be able to treat the entirety of the fee as an exempt or non-subject operation. Companies must receive invoices that correctly break down the portion subject to VAT corresponding to the catering activity, based on the market value of said activity.

What should be done

It is necessary to review concession contracts and invoicing models to ensure that the division between the transfer of space and the catering services is exact and reflects market values. A correct segregation of concepts will prevent errors in the tax settlement and ensure compliance with current regulations.