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V1037-21 21 April 2021 · SG de Impuestos sobre el Consumo Criterion in force
IVA · derecho a la deducción

A local council may deduct VAT on urbanisation if used for taxable operations

A local council asks whether VAT paid on an urbanisation project and future expenses can be deducted. The DGT responds that deductions are allowed if the amounts are allocated to operations generating the right to deduction, such as land transfers.

The question raised

Deductibility of Value Added Tax amounts incurred by the taxpayer during the aforementioned urban development, as well as those corresponding to future expenses that may be incurred (construction of a building, drafting of projects, etc.).

The DGT's ruling

The City Council shall have the status of entrepreneur or professional when it organizes means to carry out an economic activity for consideration. It may deduct the input VAT to the extent that the goods or services are used in taxable and non-exempt transactions. In the event of jointly carrying out taxable and non-taxable transactions, it must apply a reasonable and consistent criterion for the apportionment of input VAT.

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