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V1602-21 ·27 May 2021 ·consulta-vinculante Medium impact
Tax

Qualitative and quantitative requirements for applying reverse charge mechanism in building renovation works

A developer has enquired whether works to rectify construction defects in third-party buildings can be classified as renovation to apply the reverse charge mechanism. The DGT clarifies that two cumulative requirements must be met: the primary objective must be reconstruction (with more than 50% of the cost allocated to structural elements, facades, or roofs) and the cost must exceed 25% of the building's value, excluding the land.

In 6 key points

How it affects those involved

This ruling clarifies the strict criteria for developers and contractors seeking to apply the VAT reverse charge mechanism to renovation projects, highlighting the need for precise cost allocation and valuation.

Lifecycle

2021-05-27PublishedPublished in the BOE
Official text Based on BOE data (boe.es). Information, not advice.

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This analysis is informational only and does not constitute legal advice or create a client-adviser relationship. BM Consulting.
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