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V2334-14 9 September 2014 · SG de Impuestos sobre el Consumo Criterion in force
IVA · permuta de suelo

Exchange of municipal land for future works is subject to VAT as a business activity

A local council has requested a ruling on the VAT treatment of an agreement involving the transfer of a plot and development rights in exchange for a public equipment premises. The Directorate General for Taxes (DGT) has determined that the transaction constitutes a business activity and is therefore subject to VAT.

The question raised

Treatment of the operation within the scope of Value Added Tax.

The DGT's ruling

The management of municipal land assets is of a business nature; therefore, their transfers for consideration are subject to VAT. In a land swap for future construction, three operations occur: the delivery of the land (taxable, though potentially exempt depending on its nature), the delivery of the completed building (taxable), and the payment in kind of the future building (taxable). The accrual of the delivery of development rights occurs when the public announcement of the land reallocation is made.

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