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V1537-23 5 June 2023 · SG de Impuestos sobre el Consumo Criterion in force
IVA · urbanización

Sale of land in urbanisation process with assumed costs is VAT liable and does not qualify for passive investor investment

A company enquired whether the sale of a plot with urbanisation costs paid was exempt from VAT and whether passive investor investment applied. The DGT determines that the transaction is subject to VAT and that passive investor investment does not apply due to the nature of the urbanisation process.

The question raised

Whether said transfer would be subject to and exempt from Value Added Tax. Whether the reverse charge mechanism of Value Added Tax provided for in Article 84.One.2º.e), third indent, of Law 37/1992, would be applicable to the transfer.

The DGT's ruling

The delivery of land undergoing urbanization by a business person is subject to and not exempt from VAT at the general rate of 21%. Likewise, the transfer of real estate subject to the payment of urban planning charges, when these are due and the registry encumbrance is in force, gives rise to the reverse charge mechanism provided for in Article 84.One.2º.e), third indent, of Law 37/1992.

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