VAT binding tax ruling 1000/2014. Qualification of a compensation paid as a supply of services for VAT purposes


The article 78.Three.1 º does exclude from the VAT taxable base the amounts received by reason of compensation which do not constitute a consideration of supplies of goods or services subject to VAT. However, it is sometimes difficult to discern whether or not a compensation paid does constitute a consideration for a supply of goods or services.

Through the binding tax ruling number V1000/2014, the Spanish General Tax Directorate (GTD) tries to clarify those cases where a compensation constitutes a supply of service and, therefore, is subject to VAT. The case refers to a compensation paid by an administrator to his own company and in return, the latter waives its right to appeal against a judicial sentence.

To solve the query the GTD refers to the ECJ’s Case-Law (Case-Law C-215/94 and C-384/95). In the first, the Court considers that the payer of the compensation does not purchase goods and services for their own benefit, so there is no advantage that lead them into consumers of a service and, therefore, a service subject to VAT does not exist.

However, in the second sentence, the Court clarifies that to consider a compensation as a provision of services does not depend on the destination given to the service paid, but on the nature of the commitment assumed in exchange which must entail a consumption.

Based on this criterion, the GTD concluded that in the present case the amounts to be received by the company in compensation of the withdrawal of the right to appeal does constitute an act of consumption, that is, the provision of a separate and identifiable service and, therefore, it is a consideration for a service subject to VAT. The entity is required to perform certain specific tasks and obligations as well as engaging in a conduct in return for a fee, which leads it to make an act of consumption.

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