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V0988-22 5 May 2022 · SG de Impuestos sobre el Consumo Criterion in force
IVA · urbanización de terrenos

The supply of land may be exempt from VAT if material urbanization works have not commenced

A real estate developer inquires whether the acquisition of non-consolidated urban land containing ruined dwellings for the purpose of urbanization is exempt from VAT. The DGT responds that the exemption depends on whether material works of physical transformation have commenced or whether the transferor has incurred urbanization costs.

The question raised

Question posed: Whether such supplies would be exempt from Value Added Tax.

The DGT's ruling

The supply of land is exempt if it concerns rural or non-buildable land and the material urbanization process has not commenced. If the transferor has incurred urbanization costs or works of physical transformation have commenced, the land is considered to be in the process of urbanization and the supply is subject to VAT. To determine whether land is buildable, a global assessment must be made, including the intention of the parties supported by objective elements. In the event of an exemption, the taxable person may waive it if the acquirer is a taxable person entitled to deduction.

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