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V0655-20 2 April 2020 · SG de Impuestos sobre el Consumo Criterion in force
IVA · arrendamiento de vivienda

Leasing residential property to an association is subject to VAT if end users are not specified in the contract

A married couple owning a property under community property regime inquired whether leasing it to an association is exempt from VAT. The DGT ruled that, as the natural persons who will occupy the property are not named in the contract, the transaction does not qualify for the exemption and must be taxed at the standard rate.

The question raised

Liability for Value Added Tax regarding the lease consulted.

The DGT's ruling

The leasing of residential property is exempt from VAT when the effective purpose is use as a residence by the lessee, provided that the lessee is not a business entity that transfers use to third parties. For the exemption to apply when the lessee is an entity, the contract must specify the particular natural person who will be the end user, without the power to sublet or designate occupants subsequently. If the contract allows the association to designate the occupants, it is considered a subsequent transfer and the transaction is subject to tax and not exempt.

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