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V0784-14 21 March 2014 · SG de Impuestos sobre el Consumo Criterion in force
IVA · inversión del sujeto pasivo

Reverse charge mechanism applies to urbanisation works via cooperation system

A City Council requested clarification on the VAT treatment for urbanisation works carried out through a cooperation system involving levies on owners. The Directorate General for Taxes (DGT) ruled that the Administration acts as the entrepreneur, meaning the reverse charge mechanism applies.

The question raised

Treatment of said operations for Value Added Tax purposes.

The DGT's ruling

The Administration carrying out urbanization works through a cooperation system acquires the status of an entrepreneur. The reverse charge mechanism applies when the contracting company passes on the urbanization costs to the City Council. Likewise, landowners who are entrepreneurs or professionals shall be taxable persons for the assessments charged, provided they communicate their status to the Administration.

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