Skip to content
Back to index
V2132-24 2 October 2024 · SG de Impuestos sobre el Consumo Criterion in force
IVA · inversión del sujeto pasivo

Investment of passive party applies to rehabilitation works if recipient is a business owner assuming risk

A legal entity without legal personality asks whether the passive party's investment applies to the renovation of a property. The DGT states that if the entity acts as a business operator assuming risk and venture, the passive party's investment applies to construction or rehabilitation works.

The question raised

The question concerns the taxable person for Value Added Tax regarding the renovation carried out by the contractor and the right to deduct the input tax incurred in said renovation.

The DGT's ruling

The reverse charge mechanism (art. 84.One.2.f) applies if the recipient is a taxable person, the work consists of construction or renovation, and a direct contract exists. For it to be considered renovation, the cost must exceed 25% of the property value and its primary purpose must be reconstruction. The right to deduction depends on the foreseeable use; the leasing of residential property or the transfer of exempt second homes does not generate a right to deduction.

Book your free first meeting