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V1391-19 12 June 2019 · SG de Impuestos sobre el Consumo Criterion in force
IVA · arras penitenciales

Retention of penitential earnest money for withdrawal is not subject to VAT due to its compensatory nature

A company has requested a ruling regarding the VAT treatment of penitential earnest money, both when included in the price and when retained due to withdrawal, as well as the taxable person for the transfer of land. The DGT ruled that retained earnest money is not taxable as it constitutes compensation, and that the transfer of land subject to urbanisation charges involves a reverse charge mechanism.

The question raised

Liability of the payment of said earnest money for Value Added Tax, both if they become part of the final price and if, ultimately, the sale is not concluded and the consultant retains them. Taxable person for the delivery of the land and invoicing obligations.

The DGT's ruling

If the earnest money is imputed to the price, the tax accrues at the time of collection. If the buyer withdraws and the seller retains the earnest money, these have an indemnifying nature and are not subject to VAT. In the transfer of land subject to the payment of enforceable urbanization charges, the reverse charge mechanism applies. The seller must issue a corrective invoice if part of the output tax must be returned due to the termination of the contract.

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