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V0734-22 4 April 2022 · SG de Impuestos sobre el Consumo Criterion in force
IVA · inversión del sujeto pasivo

Inversion of the passive party applies if property owners act as entrepreneurs

A municipality asks whether urbanisation fees charged to property owners are subject to passive party inversion. The DGT responds that this mechanism applies whenever property owners act as entrepreneurs or professionals and notify the municipality of this status.

The question raised

Whether the reverse charge mechanism provided for in Article 84.One.2.f) of Law 37/1992 would also apply to the assessments charged by the applicant to the owners.

The DGT's ruling

The reverse charge mechanism for the taxpayer applies if the recipient acts as a business or professional. Owners are considered businesses if they collect assessments with the intention of allocating the land to an economic activity. For the rule to apply, the owners must expressly and reliably communicate their status as businesses to the City Council. If they do not act as businesses, the City Council must charge VAT applying the general rate of 21 percent.

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