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V2311-23 9 August 2023 · SG de Impuestos sobre el Consumo Criterion in force
IVA · inversión del sujeto pasivo

Inversion of the passive party applies in urbanisation works if recipients are entrepreneurs or professionals who declare their status

A local council asks about IVA treatment in urbanisation works carried out under a cooperative system. The DGT clarifies that the inversion of the passive party applies if property owners act as entrepreneurs and declare their status and notify advance payments.

The question raised

Whether the reverse charge mechanism provided for in Article 84.One.2º.f) of Law 37/1992 would apply to the urbanization works contracted by the taxpayer, as well as to the assessments passed on by the taxpayer to the owners. Accrual of the Tax on the works executed received by the taxpayer and on the assessments issued by the same to the owners. Deductibility of the Tax amounts borne by the taxpayer derived from the urbanization works contracted with the entity awarded the same.

The DGT's ruling

The reverse charge mechanism applies to urbanization works when the recipient is a businessperson or professional and communicates such status. The City Council acts as the main contractor and the assessments are the consideration for the works. The tax accrual occurs at the time of collection of advance payments, such as certifications or assessments. The deductibility of input VAT will depend on whether the works are intended for taxable, exempt, or non-taxable activities, applying the dual entity criterion and the pro rata rule.

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