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V1293-17 29 May 2017 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IVA · sociedad civil

Allocation of real estate to partners upon dissolution of a civil company is subject to VAT

A real estate development civil company has requested a ruling regarding the VAT liability of allocating real estate to its partners following dissolution. The DGT has ruled that the transaction is subject to tax and explains the rules for offsetting negative returns in Personal Income Tax (IRPF).

The question raised

1.) If the company decides to dissolve by allocating the real estate pending sale to the partners, the taxability of said operation under Value Added Tax.

The DGT's ruling

The allocation of real estate to partners in proportion to their shareholding upon the dissolution of a civil society is considered a supply of goods subject to VAT. If these are first supplies of buildings, the company must charge the tax. However, the exemption for second and subsequent supplies or the waiver thereof may apply if the partner uses the assets for a business activity. Regarding Personal Income Tax, negative returns from economic activities are integrated into the general taxable base for compensation purposes.

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