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V2312-23 9 August 2023 · SG de Impuestos sobre el Consumo Criterion in force
IVA · derechos de aprovechamiento urbanístico

Transfer of development rights by a local authority is subject to VAT if the land is urban or undergoing urbanisation

A local authority has requested clarification on whether the transfer of development rights, agreed upon through expropriation agreements, is subject to VAT. The Directorate General for Taxes (DGT) has ruled that these transfers constitute supplies of goods and, as they involve urban land or land undergoing urbanisation, they are subject to the tax.

The question raised

Whether the transfer of said development rights would be subject to, and where applicable, exempt from Value Added Tax, and the timing of the tax liability arising from such transfers.

The DGT's ruling

The transfer of development rights constitutes a supply of goods. The City Council holds the status of a taxable person when managing its municipal land assets, which are of a business nature. The supply shall be subject to VAT if the land is urban, a building plot, or undergoing urbanization (if physical transformation costs have been incurred). The tax liability arises when the rights are made available to the acquirer, following the notification or publication of the land readjustment project, or at the time of payment if advance payments are made.

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