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V1956-14 17 July 2014 · SG de Impuestos sobre el Consumo Criterion in force
IVA · tipo impositivo reducido

10% VAT rate applies to renovation works if material costs do not exceed 40% of the taxable base

A company requested clarification on the VAT rate applicable to renovation works for a homeowners' association and how to calculate material costs, including subcontracting. The DGT clarified that if materials exceed 40% of the taxable base, the standard 21% rate applies to the entire transaction.

The question raised

Applicable tax rate for the aforementioned works. Concept and limit of materials supplied in the case of works subcontracted by the main contractor.

The DGT's ruling

To apply the reduced rate of 10% to residential renovation works, the cost of materials supplied must not exceed 40% of the taxable base. In the event of subcontracting, the main contractor must account for subcontracted operations according to their nature for the subcontractor. If the 40% limit is exceeded, the execution of the work is classified as a supply of goods and is taxed at 21% in its entirety. Accessory actions necessary for the work are considered part of a single, inseparable economic operation.

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