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V2504-14 24 September 2014 · SG de Impuestos sobre el Consumo Criterion in force
IVA · arrendamiento de bienes

VAT deductibility on residential leases including hospitality services

A company that purchased residential properties for resale has enquired whether it can deduct VAT when leasing them for tourist accommodation with hospitality services. The Directorate General for Taxes (DGT) has ruled that if complementary hospitality services are provided, the activity is subject to VAT and allows for deduction.

The question raised

Issue raised: Deductibility of the input tax incurred in the acquisition of the housing.

The DGT's ruling

The leasing of housing with complementary hotel industry services (such as cleaning or weekly linen changes) is not exempt from VAT. As it is a taxable activity, the lessor may deduct 100% of the input tax incurred in the acquisition of related goods. The change of use from real estate development to hotel leasing is considered non-subject self-consumption if there was no prior right to deduction. Deductions for the acquisition of the housing must be regularized as investment goods during the nine years following their commencement of operations.

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