Statutory membership fees of an association may be exempt from VAT

The nature of the fees that members pay to a non-profit entity is a key factor in determining the tax burden of these organizations. Recently, the Dirección General de Tributos (DGT) has clarified the scope of the Value Added Tax (IVA) exemption for this type of income.

What the DGT has ruled

The advisory body has determined that access or maintenance fees for members may be exempt from IVA as long as two fundamental conditions are met:

• Statutory nature: The fees must be established in the entity's bylaws.
• Collective purpose: They must constitute consideration for services provided in the collective interest of its own members.

This criterion holds even if the association makes payments on behalf of and for the account of its members. However, the exemption disappears if the entity invoices a price that is independent of the established membership fee or if the activity performed is intended for third parties outside the association.

What this means for you

For non-profit entities, this criterion establishes a clear boundary between pure associative activity and commercial economic activity. If the fee is a tool for the member to access collective benefits and is recorded in the bylaws, there is no room for IVA. However, if the entity decides to charge an additional amount for a specific service that is not part of the statutory fee, that additional amount will be subject to the tax.

What should be done

It is necessary to ensure that the entity's income structure is consistent with its social purpose and its bylaws. The correct distinction between the membership fee and any other type of consideration for services is vital to avoid contingencies with the Administration. It is recommended to analyze the wording of the bylaws and the way collections are managed to ensure compliance with Law 37/1992 on IVA and Directive 2006/112/EC.