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V1564-14 13 June 2014 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IVA · junta de compensación

Transfer of land to cover urbanisation costs may be subject to VAT and Capital Gains Tax

A taxpayer queried the taxation of land transfers used to settle urbanisation fees. The DGT ruled that if the owner is acting as a business entity, the transfer is subject to VAT and tax on the increase in value of urban land.

The question raised

Taxation corresponding to the transfer of land in payment of urbanization costs.

The DGT's ruling

If the owner acquires the status of entrepreneur by paying the first assessment with the intent to sell, the delivery of land as payment for urbanization is subject to VAT. The exemption for land under urbanization does not apply if the owner has already incurred urbanization costs. Regarding Personal Income Tax, the delivery generates capital gains or losses, incorporating improvements into the acquisition value. Finally, the transfer to settle urbanization fees is subject to the Tax on the Increase in Value of Urban Land.

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