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V1676-22 14 July 2022 · SG de Impuestos sobre el Consumo Criterion in force
IVA · arrendamiento de bienes

Leasing of land for garden use in a dwelling is exempt from VAT

A company owning urban land has enquired whether leasing part of said land to a neighbour for use as an extension of their home is exempt from VAT. The DGT has determined that the transaction is subject to VAT but exempt due to the intended use of the land.

The question raised

Whether the aforementioned lease would be exempt from Value Added Tax.

The DGT's ruling

The lease of land by a commercial entity is considered a supply of services subject to tax. However, pursuant to Article 20.One.23º of Law 37/1992, land leases are exempt when the purpose is use as an extension of a primary residence, such as a garden. This exemption does not apply if the land is intended for parking or storage of goods.

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