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V0026-17 3 January 2017 · SG de Impuestos sobre el Consumo Criterion in force
IVA · derecho a la deducción

VAT on renovations may be deductible if the property is used for a taxable and non-exempt activity

A company inquired whether it could deduct VAT on the renovation of a property intended for short-term holiday rentals. The DGT ruled that deduction is possible if the accommodation activity is deemed taxable and non-exempt, provided it includes complementary hotel-style services.

The question raised

Question raised: Possibility of deducting the input VAT incurred in the renovation of the dwelling, considering that it will be used for a taxable and non-exempt activity, such as vacation tourist leasing.

The DGT's ruling

The leasing of residential property is exempt from VAT, but ceases to be so if complementary services typical of the hotel industry are provided, such as periodic cleaning or changing bed linen. If the accommodation activity is taxable and not exempt, the entrepreneur may deduct the input VAT incurred in the renovation of the property. This deduction must comply with the requirements of Title VIII of the VAT Law and be exercised within a period of four years.

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