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V1432-18 29 May 2018 · SG de Impuestos sobre el Consumo Criterion in force
IVA · arrendamiento con opción de compra

Lease-purchase instalments subject to VAT if final delivery is not exempt

A query was raised regarding the VAT rate applicable to a residential lease agreement with an option to purchase. The DGT ruled that the tax treatment of the instalments depends on whether the future delivery of the property is subject to or exempt from VAT.

The question raised

Type of Value Added Tax applicable to the aforementioned lease with an option to purchase.

The DGT's ruling

As long as there is no firm commitment to exercise the purchase option, the contract is classified as a provision of services. If the delivery of the dwelling is subject and not exempt, the lease installments shall also be subject and not exempt. In that case, the reduced rate of 10% shall apply. If the final delivery were exempt, the installments would also be exempt.

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