Doctrine by topic · DGT Observatory

Compensation: evolution of DGT doctrine

How the DGT's position on this topic has evolved, and the rulings it rests on.

← DGT Observatory

How the DGT's position has evolved

Settled doctrine High confidence 9 rulings · 2014–2019

Current position

Compensation for damages does not form part of the VAT (IVA) taxable base as it does not constitute consideration for an operation. In the compensation system, the insured party is the legal and material recipient of the repair service; therefore, the reduced rate applies if they are a natural person or a community of property owners. If the insurer replaces the compensation with direct repair, the recipient is the insurer and the general rate applies.

The DGT's position remains constant regarding the non-taxable nature of compensations that do not remunerate an operation. The evolution focuses on precision regarding the determination of the recipient for the application of the reduced rate. It has been clarified that the insured party is the recipient if they contract the repair, regardless of who makes the material payment.

Turning points

  1. V1150-17

    Establishes that to apply the reduced rate, the insured party must contract the repair and the invoice must be issued in their name.

  2. V2532-19

    Specifies that if the insurer replaces the compensation with direct repair, the recipient is the insurer and the general rate of 21% applies.

Analysis based on 9 of 9 rulings with a stated position. Updated 29 September 2026.

Rulings on this topic

9
V0102-14 20 Jan 2014

Cash insurance claim settlements are not subject to VAT

SG de Impuestos sobre el Consumo
base imponibleindemnizacióncontraprestaciónprestación de serviciossiniestro LIVA — Ley 37/1992 del IVA art. 78.3.1LGT — Ley 58/2003 General Tributaria art. 89.1
Affects CompanyExpat · Non-residentIndividual

Apply this to your case

VAT advisoryTalk to the team applying this doctrine daily.
Talk to the tax teamWe check whether this criterion affects you and what it means in your situation.
Email
Contact