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V1669-22 13 July 2022 · SG de Impuestos sobre el Consumo Criterion in force
IVA · rehabilitación

10% VAT applies to construction or renovation of dwellings if a direct contract exists between developer and contractor

A company has requested clarification on the VAT rate applicable to the comprehensive renovation of a property intended for residential use. The Directorate-General for Tax (DGT) clarifies that the reduced rate of 10% applies if the works constitute construction or renovation and there is a direct contract between the developer and the contractor.

The question raised

Value Added Tax rate applicable to the comprehensive renovation of a property.

The DGT's ruling

The 10% tax rate applies to the execution of construction or renovation works on buildings primarily intended for residential use, provided that a direct contract is formalized between the developer and the contractor. If the works do not meet the requirements for renovation or construction under this contractual scheme, the general rate of 21% shall apply.

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