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V0405-20 20 February 2020 · SG de Impuestos sobre el Consumo Criterion in force
IVA · deducción de cuotas

IVA deductions cannot be claimed for property renovation if rental is exempt

A company carrying out home renovations to rent to individuals asks whether it can claim VAT deductions. The DGT responds that since property rental is an exempt operation, no VAT deduction can be claimed on the costs incurred.

The question raised

Possibility of deducting the Value Added Tax incurred on the renovation, given that the leases to be carried out with the aforementioned properties will be exempt from the same.

The DGT's ruling

The VAT incurred on renovations is only deductible if used in transactions that are taxable and not exempt, or exempt under specific articles that allow for deduction. Since the leasing of housing to individuals is exempt pursuant to Article 20.One.23, the renovation VAT is not deductible. Deduction would only be possible if the lease were taxable and not exempt due to the occurrence of an exclusion case.

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