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V2031-17 26 July 2017 · SG de Impuestos sobre el Consumo Criterion in force
IVA · arrendamiento de vivienda

Leasing of residential property to a Health Service for patient use is VAT exempt if the lessee is not a business owner

An individual has enquired whether renting a property to a Regional Health Department, intended for use as sheltered housing for mental health patients, is subject to VAT. The Directorate-General for Taxes (DGT) ruled that the transaction is subject to VAT but exempt, provided the lessee acts as a final consumer and not as a business owner or professional.

The question raised

Taxation under Value Added Tax regarding the aforementioned residential lease to the regional Health Service.

The DGT's ruling

The lease of real estate for residential use is exempt from VAT provided that the lessee is the final consumer, even if use is permitted to third parties. In this case, if the Health Service does not hold the status of entrepreneur or professional for tax purposes, the lease shall be taxable but exempt. The exemption depends on the lessee not being an entrepreneur, regardless of whether the actual use is carried out by patients.

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