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V0430-16 3 February 2016 · SG de Impuestos sobre el Consumo Criterion in force
IVA · encomienda de gestión

Renovation works may be subject to VAT if classified as a supply of goods

A commercial company acting as an instrumental in-house resource for the Administration has requested a ruling on the VAT liability of a management mandate for building renovation. The DGT clarifies that services provided under a management mandate are not subject to VAT; however, construction works involving the supply of materials exceeding 40% of the taxable base are considered supplies of goods subject to the tax.

The question raised

Liability for Value Added Tax on operations derived from the management mandate, and their classification as rehabilitation.

The DGT's ruling

The provision of services carried out by public sector entities acting as an instrumental internal resource and technical service of the Administration through management mandates is not subject to VAT. However, if the actions consist of rehabilitation works where the cost of materials provided by the company exceeds 40% of the taxable base, the operation is classified as a supply of goods and is subject to the tax. For a work to be considered rehabilitation, it must meet qualitative requirements (primary object of reconstruction) and quantitative requirements (cost exceeding 25% of the building value).

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