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V0414-14 14 February 2014 · SG de Impuestos sobre el Consumo Criterion in force
IVA · inversión del sujeto pasivo

Inversion of the passive party does not apply if local authority acts neither as entrepreneur nor professional

A local council asks whether the inversion of the passive party applies to the rehabilitation of a municipal building. The DGT responds that it only applies if the council acts as an entrepreneur or professional and communicates this to the contractor.

The question raised

Reverse charge mechanism in cases of renovation or rehabilitation of a building intended for municipal premises.

The DGT's ruling

The reverse charge mechanism for the taxable person applies only if the recipient acts as a trader or professional. If the city council has no commercial nature and receives no consideration, it acts as the final consumer and the reverse charge does not apply. For the reverse charge to operate, the recipient must expressly and reliably communicate their status as a trader or professional to the main contractor. Furthermore, the mechanism does not apply if the works consist of mere renovation, maintenance, or repair, unless they are additions or improvements included within rehabilitation.

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