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V1010-22 5 May 2022 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IVA · exención

Leasing of rural land for allotments may be VAT exempt if it does not constitute a business lease

A taxpayer intends to lease rural land to sublet plots for allotments and chicken coops with water supply. The DGT determines that the subletting of rural land is exempt from VAT and that the income obtained qualifies as income from movable capital for Income Tax purposes.

The question raised

Appropriateness of applying the exemption contained in Article 20.One.23.a) of the Value Added Tax Law, both in the lease agreement in which the taxpayer is the lessee and in the subsequent sublease agreements.

The DGT's ruling

The lease of rural land is exempt from VAT pursuant to Article 20.One.23.a) of the VAT Law, provided it does not constitute the lease of a business. The supply of water is considered an ancillary provision to the transfer of the land and does not invalidate the exemption. For Personal Income Tax (IRPF) purposes, income from the subletting of real estate constitutes returns on movable capital, unless it constitutes an economic activity. For these returns, the expenses necessary for their acquisition are deductible.

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