Sale of electricity in the future, covering market fluctuations


Binding tax ruling V1681-15 issued by the Spanish General Tax Directorate (DGT) on May 28, 2015.

This binding tax ruling analyses the treatment of the operations performed by an entity aimed to acquiring electricity in the market then resells to its industrial partners; To hedge against fluctuations in the price of electricity, it signs with third derivative contract price hedging that are settled by differences depending on the fluctuating price of real power and the guaranteed price in the contract.

The analysis of such derivative requires distinguishing whether these contracts are financial or non-financial nature, depending on whether the contract settlement at maturity will result in the delivery of the electricity to which it relates, those others which underlying is purely financial.

In the first case it would result in contracts to supply electricity, which are subject to and not exempt from VAT.

By contrast, in the second case, which is what would apply in this case, the contract is not intended to make a delivery or purchase of electricity at a future date, but seeks to ensure a certain price of the underlying, that while referencing with the price of electricity, is a purely financial transaction.

These financial transactions constitute supplies of services, in accordance with the provisions of Article 20.One.18, letter k) of the Law 37/1992 of VAT, which will be exempt from VAT.

In this regard, as is known, the joint execution of supplies of goods or services which allow to deduct VAT and other similar operations which do not qualify for the exercise of that right shall entail the application of the rule of proportion provided that the financial activity is treated as usual, it seems proven in this case, so that these operations should be taken into account in calculating the percentage of deduction applicable for this entity.

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DGT V1681 15

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