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V2447-14 18 September 2014 · SG de Impuestos sobre el Consumo Criterion in force
IVA · sujeción

Land transfers by a commercial company may be subject to VAT or exempt depending on urbanisation status

A City Council has requested clarification regarding VAT liability and exemptions when acquiring land through a swap with a commercial company. The DGT explains that the transaction is subject to VAT if the land is used for business activities and details the specific exemption criteria based on the nature of the land.

The question raised

1. Liability and, where applicable, exemption from Value Added Tax regarding the acquisition of land by the City Council.

The DGT's ruling

The supply of land by a commercial company is subject to VAT if the real estate is used for its business activity. The transaction shall be exempt if it concerns rural or non-buildable land indispensable for agricultural exploitation, or intended for parks, gardens, or public roads. There shall be no exemption if the land is urbanized, undergoing urbanization, or consists of building plots/buildable land. Land is considered to be undergoing urbanization from the moment the execution of infrastructure provision works begins.

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