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V0934-20 17 April 2020 · SG de Impuestos sobre el Consumo Criterion in force
IVA · deducción de cuotas

IVR deductions allowed for building purchase and renovation if directed to taxable business activity

A hospital group company asks whether it can deduct VAT on the purchase and renovation of a building it leases to its parent. The DGT responds that deductibility depends on the intention to use the assets for a taxable business activity, not an exempt one.

The question raised

Whether the Value Added Tax amounts incurred in the acquisition and renovation of the building are deductible, and, where applicable, the method for determining the tax base for the leasing transactions carried out by the applicant

The DGT's ruling

The right to deduction arises from the intention to allocate goods or services to a business activity subject to the tax. The relationship between the lessor and the lessee does not, in itself, prevent the deductibility of the amounts incurred. However, under the special regime for groups of entities (advanced modality), the tax base for intra-group transactions shall not include costs for which the tax could not be deducted. The existence of abusive practices is a question of fact that must be verified by the Administration.

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