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V0416-22 3 March 2022 · SG de Impuestos sobre el Consumo Criterion in force
IVA · primera entrega

Purchasing a property from a developer is subject to 10% or 21% VAT depending on its suitability as a residence

An individual has enquired whether purchasing a property previously used for holiday rentals is exempt from VAT. The DGT has ruled that, if there has not been continuous use by tenants for a period of two years, the transaction constitutes a first supply subject to VAT. A 10% rate applies if the property is suitable for residential use, whereas a 21% rate applies otherwise.

The question raised

Treatment of the transfer of the real estate for Value Added Tax purposes.

The DGT's ruling

The transfer of a building by a developer is considered a first delivery and is subject to VAT if there has not been uninterrupted use of the property for a period equal to or greater than two years by its occupants. The tax rate shall be the reduced rate of 10% if the dwelling possesses a certificate of habitability or a first occupancy license and is objectively capable of being used as a dwelling; otherwise, the general rate of 21% shall apply.

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