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V1800-19 11 July 2019 · SG de Impuestos sobre el Consumo Criterion in force
IVA · urbanización

Transfer of land without physical transformation works is VAT exempt, unless expressly waived

A company has requested a ruling regarding the VAT liability and exemption for the transfer of urban development rights. The DGT clarifies that if no material urbanisation works have commenced, the transfer of the land is exempt from VAT, although the taxable person may choose to waive this exemption.

The question raised

1) Liability, and where applicable, exemption of the transfer pursuant to Article 20.One.20º of the Value Added Tax Law, as well as the possibility of waiving said exemption.

The DGT's ruling

The transfer of land is exempt from VAT if it is carried out before the commencement of the material urbanization process, i.e., before providing the land with infrastructure such as road access or utilities. If physical transformation works have commenced or urbanization costs are incorporated, the land is considered to be in the process of urbanization and the transfer shall not be exempt. The taxable person may waive the exemption if the acquirer is entitled to a tax deduction.

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