Operations derived from self-consumption tax advice will not be subject to VAT
On June 23rd, the Directorate General of Taxes (DGT) ruled in its consultation V2053 / 2020 that self-consumption derived from the forgiveness of the rent of a business premises during the state of alarm will not be subject to VAT.
In this case, the situation of a natural person owning a commercial premises that he has leased for cafeteria activities is analyzed. After the state of alarm comes into effect, the leased decides that it will not charge the tenant the rent corresponding to several monthly payments. Given this, the VAT Law establishes a series of criteria:
- According to art. 75.uno.7º of Law 3/1992: the non-payment of the rents corresponding to some of the months by the lessee derives from a remission of said rent by the lessor.
- According to art. 78 of Law 3/1992: the taxable base of said Tax "will be constituted by the total amount of the consideration of the operations subject to it from the recipient or third parties."
- According to art. 78.Three 2 of Law 3/1992: if, after the accrual of the operations, a reduction in the amount established as rent for the lease is stipulated between the contractors, the reduction of the tax base in the corresponding amount will proceed.
- According to art. 78.Three. 2 of Law 3/1992: if said partial remission of the rent is made before or simultaneously with the moment in which its enforceability has been agreed, it must be understood that the new rent has been reduced by the corresponding amount.
- According to art. 80.Two of Law 3/1992: the partial remission of the rent established in the premises lease contracts, understood as a reduction of the agreed rent at a later time to its accrual, the provisions of this section will be applicable.
- According to art. 12 of Law 3/1992: in the event of total forgiveness of income, self-consumption of services will be operations assimilated to the provision of services for consideration. Therefore, when the operations carried out free of charge are carried out to serve the company's own purposes, it can be deduced that they are not subject to tax.
In summary, the total forgiveness of the rental income from the business premises determines the performance of an operation subject to tax. This is so because it is an operation assimilated to the provision of services in its condition of self-consumption of services.
However, the following regulations must be taken into account:
- The art. 26 of Council Directive 2006/112/EC allows Member States not to expressly tax these operations when non-subjection is not a cause of distortion of competition.
- The art. 7 of RD 463/2020 has limited the movement of people through roads or spaces for public use and establishes containment measures that may lead to the closure of certain premises or activities.
In conclusion, the self-consumption derived from the forgiveness of the rent of a business premises will not be subject to VAT when the lessee cannot carry out any economic activity in it by application of the provisions established during the validity of the state of alarm.
B Law & Tax
International Tax & Legal Advisors.