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V1866-23 27 June 2023 · SG de Impuestos sobre el Consumo Criterion in force
IVA · patrimonio municipal del suelo

Transfer of urbanised land by a local authority is subject to VAT and does not qualify for exemption

A local authority has requested clarification on whether the transfer of land divided into developable plots and a green area is subject to or exempt from VAT. The Directorate General of Taxes (DGT) has ruled that the transaction is subject to VAT as it forms part of the municipal land assets and the exemption does not apply because the land is urbanised.

The question raised

Whether said transfer is subject to, and if applicable, exempt from, Value Added Tax.

The DGT's ruling

The transfer of land by a City Council is subject to VAT when such land forms part of the municipal land assets, which have a business character. The exemption provided in Article 20.One.20º of the VAT Law does not apply because the land is urbanized or is undergoing urbanization. In the event that it is not considered a business activity, the transfer would be subject to Transfer Tax.

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