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V2259-19 20 August 2019 · SG de Impuestos sobre el Consumo Criterion in force
IVA · establecimiento permanente

Tenant is VAT liable if landlord lacks human or technical resources in Spain

A consultant based outside the EU carried out works in a property to be rented, asking whether the property constitutes a permanent establishment and whether VAT on the works can be deducted. The DGT determines that the tenant will be the VAT liable party if the landlord has no own or subcontracted human or technical resources in Spain, and that the works are deductible if the intention to carry out an taxable activity is proven.

The question raised

Consideration of the premises as a permanent establishment, the taxable person in the lease thereof, and the eligibility for the deduction of Value Added Tax installments incurred by the execution of works in the corresponding quarterly returns.

The DGT's ruling

The leased property may constitute a permanent establishment if it possesses an adequate structure of human and technical resources with a degree of permanence. However, if the lessor does not maintain material and human resources, whether owned or subcontracted, for the activity, no permanent establishment exists and the VAT taxable person shall be the lessee. The installments for construction works are deductible if the intention to allocate the property to a taxable and non-exempt activity is proven through objective elements.

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