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V0562-22 18 March 2022 · SG de Impuestos sobre el Consumo Criterion in force
IVA · rehabilitación de edificaciones

VAT rate for renovation works depends on whether the property is for residential or tourist use

A resident in Mauritania requested clarification on the VAT applicable to the renovation of a cabin for tourist use. The DGT ruled that the tax rate and the reverse charge mechanism depend on the nature of the activity and the existence of a permanent establishment.

The question raised

The following questions are raised for the purposes of Value Added Tax:

The DGT's ruling

Renovation works on buildings intended for residential use may be taxed at the reduced rate of 10%, but if they are intended for tourist accommodation with hotel services, the general rate of 21% shall apply. The inquirer is an entrepreneur/professional since the acquisition of assets with business intent. The reverse charge mechanism applies if the inquirer is an entrepreneur and the work is a renovation. The lease to a commercial entity for tourist use does not constitute a permanent establishment if the owner does not have their own human and technical resources in Spain.

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