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V2300-22 31 October 2022 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · actividad económica

Income tax and VAT on land transfers depend on economic activity and land status

An owner of urban land seeks clarification on how the transfer of plots following a subdivision and development process under a cooperation system will be taxed. The DGT clarifies that Income Tax (IRPF) treatment depends on whether a real estate development activity exists, while VAT depends on the timing of the transfer and the payment of development costs.

The question raised

Taxation under Personal Income Tax (IRPF) regarding the transfer of the land.

The DGT's ruling

In Personal Income Tax (IRPF), if there is no real estate development economic activity, the sale generates a capital gain or loss. For VAT purposes, the owner acquires the status of an entrepreneur when urbanization costs are passed on to them and there is an intention to sell. VAT liability will depend on whether the land is undergoing urbanization, is already urbanized, or is buildable at the time of delivery.

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