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V0571-20 10 March 2020 · SG de Impuestos sobre el Consumo Criterion in force
IVA · urbanización de terrenos

Transfer of urbanised plots by a municipal company to settle debt is subject to VAT

A City Council has requested a ruling regarding the VAT treatment of urbanised plots transferred by a municipal company to cancel a debt. The DGT has determined that the transaction is subject to tax and examines the possibility of the reverse charge mechanism.

The question raised

Taxation of the operation for Value Added Tax purposes.

The DGT's ruling

The transfer of urbanized plots by a municipal company is subject to VAT if the entity acts as a businessperson or professional, whether by having urbanized the land, by being engaged in a business activity, or by managing the municipal land heritage. As they are urbanized plots, the exemption under Article 20.one.20º does not apply. The reverse charge mechanism would only apply if the properties constitute a guarantee for the debt and the acquirer is a businessperson or professional; otherwise, the transferor is the taxable person.

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