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V2404-23 7 September 2023 · SG de Impuestos sobre el Consumo Criterion in force
IVA · entrega de bienes

Delivery of urban land via capital reduction subject to 21% VAT

A limited company seeks advice on VAT treatment of land allocation to shareholders through capital reduction. The DGT confirms the transaction is VAT liable, except where the land is rural or meets specific exemption criteria.

The question raised

Taxation of the transaction for the purposes of Value Added Tax.

The DGT's ruling

The supply of goods by a business person is subject to VAT, but the exemption for rural land does not apply if the land is a building plot or is developable. If the land is in the process of urbanization because the transferor has incurred physical transformation costs, the supply shall be subject to tax and not exempt. In the case of building plots, the transaction is subject to the 21% rate.

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