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V0348-20 13 February 2020 · SG de Impuestos sobre el Consumo Criterion in force
IVA · deducibilidad

No deduction of VAT if intention to carry out taxable activity exists

An real estate company asks whether a future tenant being a linked entity affects the deductibility of VAT on prior purchases. The DGT states that linkage does not affect deductibility based on intention to carry out a taxable activity, but warns about abusive practices and the need to use market value.

The question raised

Clarification of some of the issues in the binding ruling of August 13, 2019, inquiry V2142-19.

The DGT's ruling

The deductibility of input VAT incurred prior to the commencement of operations depends on the intention to allocate the goods to a taxable business activity. The existence of a relationship with the lessee does not change this criterion, although the Administration may verify whether there is an abuse of rights or fraudulent practices. In transactions between related parties, the tax base must be the normal market value if the recipient is not entitled to full deduction.

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