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V1185-19 29 May 2019 · SG de Impuestos sobre el Consumo Criterion in force
IVA · arrendamiento de viviendas

Rental of properties to a linked entity for tourist subletting subject to 21% VAT

A German entity enquires about the applicable VAT rate when leasing properties to another linked entity for tourist use. The DGT determines that the operation loses its exemption and is subject to general VAT due to subsequent subletting.

The question raised

The applicable Value Added Tax rate for the rental of these dwellings to another entity that will use them for tourist rentals.

The DGT's ruling

The leasing of real estate for residential use is exempt from VAT, unless the lessee subsequently carries out a transfer in the course of a business activity. In this case, the transaction becomes taxable and not exempt. If hotel industry services are provided, the rate shall be 10%; otherwise, it shall be 21%. Due to the related-party nature, the taxable base must be the normal market value.

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