- The DGT concludes that the fee for a concession of public domain for the operation of a municipal market is not subject to VAT.
- The municipality plans to tender a concession of exclusive use of a public domain land for the construction and operation of a municipal market with underground parking.
- The concessionaire will build the building and will have the right to operate part of the property as a supermarket and the parking lot for 50 years.
- In exchange, the concessionaire will pay the municipality an initial fee.
- The operation of the supermarket and the parking lot will be at the concessionaire’s own risk.
- The municipality inquires whether the payment of the initial fee by the concessionaire is subject to Value Added Tax (VAT).
- The DGT states that the VAT applies to the delivery of goods and services provided by entrepreneurs or professionals for a consideration.
- A municipality can be considered an entrepreneur or professional when it orders material and human resources to carry out economic activities.
- However, it does not have this condition if it acts outside the business sphere and is limited to managing the public domain.
- The DGT states that administrative concessions are not subject to the tax, except for specific exceptions (ports, airports, railways, etc.).
- The DGT reminds that concessions of public domain are transfers of public domain goods without the Administration acting as an entrepreneur.
- In these cases, the fee paid is not subject to VAT, as it does not constitute a business consideration but rather an exploitation of the public domain.
- The DGT differentiates between a concession of public domain and a concession of services.
- In a concession of services, the Administration commissions the management of a public service, and the concessionaire assumes the operational risk.
- In a concession of public domain, a public domain asset is ceded for economic exploitation, without the transfer of operational risk.
- If the contract were a concession of services, it could be subject to VAT. However, the DGT considers that in this case it is a concession of public domain, so the exemption of article 7.9 of the VAT Law applies.
- Although the fee is not subject to VAT, the subsequent operation of the supermarket and the parking lot by the concessionaire will be subject to VAT, applying the VAT regime corresponding to those activities.
Source: audiconsultores-etlglobal.com
Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.
