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V2430-14 15 September 2014 · SG de Impuestos sobre el Consumo Criterion in force
IVA · permuta

Exchange of rural land for building plots by a local authority is subject to VAT if carried out by businesses

A local authority has requested a ruling on the VAT treatment of an exchange operation in which it acquires rural land in return for building plots derived from compulsory transfers. The Directorate-General for Taxes (DGT) determines that the management of public land assets constitutes a business activity and analyses the applicable taxation and exemptions.

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 a business activity; therefore, the transfer of land by the City Council is subject to VAT if carried out for consideration. The transfer of rural estates shall be subject to VAT if the transferor is a business person, although it could be exempt if the lands are rural or intended for public use road surfaces. The transfer of urban development rights by the City Council is also subject to VAT as it constitutes a business activity. The transfer of rural estates constitutes an advance payment regarding the future assignment of the plots.

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