Component elements of an economic unit not subject to Value Added Tax

The General Directorate of Taxes, in Binding Consultation V2081-22, considers that the transmission of a portfolio of insurance policies is not subject to VAT.

The General Directorate of Taxes (hereinafter, “DGT”), in its Binding Consultation V2081-22, considers that the transfer of a portfolio of insurance policies is not subject to VAT, even if the transferred assets do not include the installations or offices where the transferor carried out the activity or its intellectual property rights.

Based on article 7.1 of the VAT Law, the DGT concludes that for the transfer not to be subject to VAT, the following conditions are required:

• That the transferred elements constitute an autonomous economic unit capable of developing an activity by its own means.
• That said economic activity is affected to the development of an activity.

It is on the basis of this precept, that the DGT concludes that the assets transferred constitute an autonomous economic unit, indicating that the exclusion of certain assets in the transfer of business assets does not constitute an obstacle, in order to to be able to apply the assumption of non-taxation, provided that the unit transferred is accompanied by the necessary organizational structure of material and human production factors for its operation. Therefore, the DGT considers in this case that the elements not transferred "are not consubstantial and necessary components in order for the portfolio of insurance policies to constitute the transfer of an operative company, and therefore for the autonomous economic unit transferred to be able to operate by its own means. "