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V1861-19 17 July 2019 · SG de Impuestos sobre el Consumo Criterion in force
IVA · arrendamiento financiero

VAT on sheltered housing is deductible through the application of the split-sector regime

A non-profit association has enquired whether it can deduct VAT on housing acquired via financial leasing for its employees. The DGT has ruled that, as the entity carries out both taxable and exempt activities with significantly different deduction percentages, it must apply the split-sector regime.

The question raised

Whether it is possible to deduct the Value Added Tax amounts incurred from the acquisition of the aforementioned housing under a financial leasing arrangement.

The DGT's ruling

The sheltered housing service is an operation subject to VAT (10% rate) as it is assimilated to hotel services. Since the entity carries out taxable activities (car washing, gardening, sheltered housing) and exempt activities (social assistance), and since its deduction percentages differ by more than 50 points, it must apply the split recovery method. The input VAT incurred on the housing will only entitle a deduction if used in a sector that generates a right to such deduction, applying Article 104 for common use goods.

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