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V1145-18 7 May 2018 · SG de Impuestos sobre el Consumo Criterion in force
IVA · derecho a la deducción

The right to VAT deduction for urbanization works depends on the tax treatment of the sale of the land

An entity inquired whether it could deduct VAT on works performed to comply with urban planning obligations on land intended for transfer. The DGT ruled that deductibility depends on whether the transfer of said land is subject to VAT or is exempt.

The question raised

Question raised: Right to deduct the amounts incurred by the applicant upon receipt of goods and services related to the works carried out in compliance with the aforementioned urban planning obligations or burdens.

The DGT's ruling

The right to deduct the amounts incurred for works complying with urban planning obligations shall depend on the tax treatment of the sale of the land. If the transfer is carried out while the land is undergoing urban development or is already developed, the transaction shall be taxable and not exempt, allowing for the deduction. If the transfer occurs before the physical transformation of the land begins, it could be exempt and not allow for the deduction. In any case, the deduction is only applicable if the goods and services are used in taxable and non-exempt transactions.

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