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V0573-20 10 March 2020 · SG de Impuestos sobre el Consumo Criterion in force
IVA · actividad empresarial

Transfer of plots by a local authority may be subject to VAT if carried out as part of a business activity

A local authority has requested clarification on whether the sale of plots resulting from the grouping and subdivision of estate properties is subject to VAT. The Directorate General of Taxes (DGT) indicates that liability will depend on whether the transfer is carried out within the framework of a business activity, such as in the case of municipal land assets or developed land.

The question raised

Whether the supply of the aforementioned building plots would be subject to Value Added Tax.

The DGT's ruling

The supply of plots by public entities is subject to VAT when the plots are used for a business activity, whether they are urbanized land or the transfer involves the arrangement of means to intervene in the production or distribution of goods. Municipal land assets constitute business assets; therefore, the supply of land acquired through compulsory transfer is subject to the tax. As the land subject to this inquiry consists of building plots, the exemption for non-buildable land does not apply.

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