Doctrine by topic · DGT Observatory

Binding Ruling — evolution of DGT doctrine

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

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How the DGT's position has evolved

Settled doctrine High confidence 11 rulings · 2015–2025

Current position

Compensation for the early termination of a contract does not constitute an operation subject to IVA (Value Added Tax) as it does not represent consideration for goods or services nor an act of consumption. However, if the termination involves the transfer of the power of disposal of a good, said delivery is subject to the tax. In that case, the nature of the delivery (initial or subsequent) will determine the application of exemptions.

The position of the DGT remains constant in the distinction between pure compensation and the transfer of goods. The rulings confirm that payment for damages is not consideration, but clarify that if the termination entails the delivery of an asset, the delivery must be taxed. No changes in criterion are observed, but rather a repeated application of this differentiation.

Turning points

  1. V2633-17

    Specifies that termination may involve a delivery of goods subject to IVA if the power of disposal is transferred, distinguishing it from the transfer of an autonomous economic unit.

  2. V0430-22

    Establishes that if the client retains the machinery after the termination, the amount constitutes the consideration for a delivery of goods subject to the tax.

Analysis based on 11 of 11 rulings with a stated position. Updated 27 September 2026.

Rulings on this topic

11
V2566-25 18 Dec 2025

Assumption of penalties under telecom contracts exempt from VAT

SG de Impuestos sobre el Consumo
asunción de penalizaciónacto de consumocontraprestaciónprestación de serviciosresolución anticipada LIVA — Ley 37/1992 del IVA art. 4LIVA — Ley 37/1992 del IVA art. 5
Affects CompanyExpat · Non-residentIndividual
V0491-20 27 Feb 2020

Compensation for early contract termination is not subject to VAT

SG de Impuestos sobre el Consumo
base imponiblecontraprestaciónindemnizaciónresolución anticipadahecho imponible LIVA — Ley 37/1992 del IVA art. 78.1LIVA — Ley 37/1992 del IVA art. 78.3.1
Affects CompanyExpat · Non-residentIndividual

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