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V1614-20 26 May 2020 · SG de Impuestos sobre el Consumo Criterion in force
IVA · rehabilitación de edificaciones

The 10% reduced VAT rate for renovation works requires meeting qualitative and quantitative requirements

An entity without legal personality has enquired whether the works carried out to prepare a property for subsequent sale may qualify for the reduced VAT rate. The DGT clarifies that to apply the 10% rate, the works must constitute renovation and satisfy specific criteria regarding cost and technical nature.

The question raised

Whether the works carried out are considered rehabilitation works and if the reduced rate of Value Added Tax is applicable to them.

The DGT's ruling

To apply the reduced rate of 10% to rehabilitation works, two phases must be met: first, that the primary object is reconstruction (more than 50% of the cost in structural elements, facades, roofs, or analogous/related elements); second, that the total cost exceeds 25% of the value of the building (excluding the land). The nature of the works is a matter of fact that must be substantiated with technical evidence. If these requirements are met and the building is primarily intended for residential use, the execution of the works is taxed at 10%.

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