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V1340-14 20 May 2014 · SG de Impuestos sobre el Consumo Criterion in force
IVA · prestación de servicios única

Execution of real estate works with subcontracts may qualify as a single supply of services

A temporary joint venture (UTE) inquired whether the subcontracting of a comprehensive hospital renovation abroad through three separate contracts should be considered a single transaction. The DGT ruled that, as the activities are closely related to a turnkey delivery, they constitute a single supply of services provided that the cost of materials does not exceed 40% of the taxable base.

The question raised

Classification of the operations derived from the three contracts as a single activity or operation and the place of performance thereof.

The DGT's ruling

When the activities of a work are so closely linked that their breakdown would be artificial, they are considered a single performance. If the cost of the materials provided by the contractor is less than 40% of the taxable base, the operation is classified as a provision of services. In this case, as it concerns a work on real estate located outside the territory of application of the tax, the provision shall not be subject to VAT.

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