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V0585-17 8 March 2017 · SG de Impuestos sobre el Consumo Criterion in force
IVA · derecho a la deducción

Full VAT deduction permitted for management services related to office and hotel rentals

A real estate investment company has requested clarification regarding the deductibility of VAT on management services. The Directorate General for Taxes (DGT) has ruled that, by applying the special pro rata rule, the company may deduct VAT on management services associated with the rental of offices and hotels, but cannot deduct VAT on services linked to the rental of residential properties.

The question raised

Deductibility of the fees incurred by the taxpayer for the management services provided by the Management Company.

The DGT's ruling

When performing taxable and exempt operations, the deduction is governed by the special pro rata rule. Management service fees exclusively related to the rental of offices and hotels are fully deductible as they are taxable and not exempt operations. Conversely, fees related to the leasing of residential housing are not deductible as they are exempt operations. If the services are used in both activities, the deduction percentage shall be applied according to Article 104 of Law 37/1992.

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