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V0950-21 19 April 2021 · SG de Impuestos sobre el Consumo Criterion in force
IVA · inversión del sujeto pasivo

Passive investment in rehabilitation works requires cost and object limits

A company asks whether renovation works on its buildings qualify for passive investment in VAT. The DGT explains that this mechanism applies only to construction or rehabilitation works that meet cost and nature limits.

The question raised

Application of the reverse charge mechanism to the described adaptation works.

The DGT's ruling

The reverse charge mechanism requires that the recipient be a businessperson or professional and that the operations involve urbanization, construction, or rehabilitation. For a work to qualify as rehabilitation, its primary object must be reconstruction (more than 50% of the cost in structural elements, facades, roofs, or analogous/connected works) and the total cost must exceed 25% of the building value. If the projected works do not qualify as rehabilitation under these parameters, the reverse charge mechanism is not applicable.

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