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V0887-18 6 April 2018 · SG de Impuestos sobre el Consumo Criterion in force
IVA · urbanización

Sale of land undergoing development by entrepreneurs is subject to VAT and does not qualify for exemption

A query was raised regarding the VAT treatment of land transfers by a homeowners' association seeking to develop and sell plots. The DGT has determined that if owners incur development costs with the intent to sell, they acquire the status of entrepreneurs, making the supply of land undergoing development or land suitable for building subject to VAT.

The question raised

Taxation under Value Added Tax regarding the transfer of land.

The DGT's ruling

Landowners become entrepreneurs when they incorporate urbanization costs and have an intention to sell. The delivery of land undergoing urbanization or already urbanized is subject to and not exempt from VAT. Building land (plots or with licenses) is also subject to the tax by express exclusion from the exemption. Only rural or non-buildable land is exempt, unless the physical transformation of the land has commenced.

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