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V0020-18 9 January 2018 · SG de Impuestos sobre el Consumo Criterion in force
IVA · urbanización

VAT applies to land undergoing urbanisation, whereas unurbanised land is exempt

A query was raised regarding whether the acquisition of estates within an execution unit of a Partial Plan is subject to VAT or Transfer Tax. The DGT has determined that taxation depends on whether works for the material transformation of the land have commenced.

The question raised

Taxation of the aforementioned operation by Value Added Tax or by Transfer Tax.

The DGT's ruling

Land undergoing urbanization or already urbanized is subject to VAT and does not benefit from the exemption under Article 20.One.20º. If physical transformation works have not commenced or the transferor has not incurred urbanization costs, the land retains its rural nature and the transfer is exempt from VAT. In the specific case, the land in the first phase is undergoing urbanization (subject to VAT), whereas the land in the second phase is not (exempt from VAT).

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