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V0880-20 15 April 2020 · SG de Impuestos sobre el Consumo Criterion in force
IVA · urbanización

Transfer of land by a local authority may be subject to or exempt from VAT depending on its level of development

A housing cooperative has requested clarification on whether the acquisition of land from a local authority for social housing is subject to or exempt from VAT. The Directorate-General for Taxes (DGT) explains that taxation depends on whether urbanisation works have commenced or if the land is already classified as buildable.

The question raised

Whether the delivery of the referred land would be subject to and, where applicable, exempt from Value Added Tax.

The DGT's ruling

If the delivery occurs before the physical transformation of the land begins, the operation is exempt from VAT pursuant to Article 20.One.20º of Law 37/1992. If the transferor has incurred urbanization costs or if material works have commenced, the land is considered to be in the process of urbanization and the delivery is taxable and not exempt. In the event that the land is already buildable or a development plot, the delivery is taxable and not exempt due to express exclusion from the exemption.

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