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V0031-18 10 January 2018 · SG de Impuestos sobre el Consumo Criterion in force
IVA · urbanización de terrenos

Sale of developed land by an individual is not subject to VAT if they do not hold business status

An individual enquired whether the sale of a rural plot that had undergone development, without prior intent to sell, was subject to VAT. The DGT ruled that, as the individual did not act as a business owner nor have an intention to sell, the transfer is not subject to the tax.

The question raised

Taxation under Value Added Tax regarding the transfer of land.

The DGT's ruling

For the transfer of urbanized land to be subject to VAT, the transferor must hold the status of entrepreneur or professional, which requires having incurred urbanization costs with the intent to sell, allocate, or assign. If the owner does not assume the costs of the material transformation of the land and does not have the intention to sell it, they do not become an urbanizer or an entrepreneur. In this case, the transfer is not subject to VAT, although it could be subject to Transfer Tax and Documented Legal Acts Tax.

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