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V2027-17 26 July 2017 · SG de Impuestos sobre el Consumo Criterion in force
IVA · inversión del sujeto pasivo

Reverse charge mechanism for urbanisation works carried out by a local authority for a consortium

A local authority has requested clarification on whether urbanisation works carried out for an Urban Development Consortium are subject to VAT and which mechanism applies. The DGT clarifies that the reverse charge mechanism applies if the Consortium acts as a business or professional.

The question raised

Clarification to the binding ruling of this management center dated June 8, 2016, consultation no. V2507-16.

The DGT's ruling

When a City Council executes urbanization works for a consortium, it acts as an entrepreneur or professional by organizing personal and material resources under its responsibility. Therefore, the operations are subject to VAT and the reverse charge mechanism must be applied, provided that the recipient consortium acts in the capacity of an entrepreneur or professional.

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