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V2018-23 11 July 2023 · SG de Impuestos sobre el Consumo Criterion in force
IVA · inversión del sujeto pasivo

The subcontractor must apply the general rate of 21% and the reverse charge mechanism applies to its invoices to the main contractor

An audiovisual equipment installation company has requested clarification on whether its work on a property under construction qualifies for the reduced VAT rate and the reverse charge mechanism. The Directorate General of Taxes (DGT) has ruled that while the reverse charge mechanism applies, the general VAT rate of 21% must be used as the company is acting as a subcontractor.

The question raised

Whether the installation of the aforementioned room can be considered a construction project and gives rise to the application of the reverse charge mechanism and the reduced VAT rate.

The DGT's ruling

The taxpayer's investment is applicable if the recipient is an entrepreneur or professional and the work is part of a construction or renovation. However, the reduced rate of 10% only applies to works contracted directly between the developer and the contractor. As the consultant acts as a subcontractor for a main contractor, the general tax rate of 21% applies.

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