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V1140-19 24 May 2019 · SG de Impuestos sobre el Consumo Criterion in force
IVA · escisión

Demerger of a leasing activity may be exempt from VAT if it constitutes an autonomous economic unit

The applicant questions whether the demerger of its residential leasing activity into new companies is subject to VAT and if the reduced 4% rate can be applied. The DGT indicates that non-subjectivity depends on whether the transferred elements form an autonomous economic unit and analyses the application of the 4% rate based on the intended use of the properties.

The question raised

Liability for Value Added Tax on spin-off operations, as well as the application of the reduced tax rate of 4 percent for entities dedicated to the leasing of dwellings in newly incorporated companies.

The DGT's ruling

The transfer shall not be subject to VAT if the transferred elements constitute an autonomous economic unit capable of carrying out an activity by its own means. If the operation were subject to tax, the dwellings could be exempt pursuant to Article 20.One.22 of the Law. The 4 percent rate applies if the acquiring entity has a confirmed intention to dedicate the dwellings to leasing with the right to a tax allowance. In the case of a SOCIMI, there shall be no rectification of the 4 percent rate if the dwellings remain leased for at least three years.

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