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V1432-21 17 May 2021 · SG de Impuestos sobre el Consumo Criterion in force
IVA · patrimonio público del suelo

The transfer of a plot of land by a City Council is subject to VAT at 21% and the exchange of a building may be exempt

A City Council inquires regarding the VAT and Transfer Tax (ITP) taxation of the disposal of a plot of land through an exchange for a building and a possible expropriation. The DGT determines that the transfer of the plot is subject to VAT as it constitutes a business activity and that the transfer of the building received may be exempt if it is a second transfer.

The question raised

Question raised: On one hand, the applicant questions the possible liability, exemption and, where applicable, the tax rate applicable to the operation of the disposal of the plot under Value Added Tax. On the other hand, it inquires whether the exchange operation as partial payment for the plot, which implies a second or subsequent transfer of a building, shall be subject to Transfer Tax (ITP) and whether the City Council shall be exempt from it. Finally, the possibility of the expropriation operation being subject to Transfer Tax (ITP) and its possible exemption from Value Added Tax.

The DGT's ruling

The transfer of a plot of land by a City Council constitutes a business activity involving the management of public land assets, and is therefore subject to VAT at 21%. The transfer of the building received in exchange shall be subject to but exempt from VAT if it constitutes a second or subsequent transfer. In the event of expropriation, the transfer shall be subject to VAT only if the transferor is a businessperson or professional. The City Council is exempt from Transfer Tax (ITP) due to its status as a Public Administration.

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