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V0006-24 6 February 2024 · SG de Impuestos sobre el Consumo Criterion in force
IVA · promotor subsidiario

10% VAT rate applies to energy and urban renewal works under specific conditions

A local council asks about the VAT applicable to energy efficiency and urban renovation works. The DGT clarifies that a 10% reduced rate may be applied if qualitative and quantitative rehabilitation criteria are met, or alternatively, if renovation and repair criteria are satisfied.

The question raised

Taxable person and the applicable rate of Value Added Tax in the execution of rehabilitation works to be carried out by the consultant for each owner and in urbanization works. Taxable base of the Tax in rehabilitation works. Deductibility of the Tax amounts incurred in the specified works executions.

The DGT's ruling

To apply the 10% rate for rehabilitation, the project must meet qualitative requirements (more than 50% of the cost in structural elements, facades, or roofs) and quantitative requirements (cost exceeding 25% of the value of the property excluding the land). If it is not classified as rehabilitation, the 10% rate may be applied to renovations if the recipient is a natural person or a community of owners and the cost of materials does not exceed 40% of the taxable base. The City Council, acting as a subsidiary developer, cannot deduct VAT on residential rehabilitation works. In redevelopment works, the tax amounts shall not be deductible if they are exclusively allocated to exempt operations.

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