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V2604-20 31 July 2020 · SG de Impuestos sobre el Consumo Criterion in force
IVA · inversión del sujeto pasivo

Subject passive investment in construction or rehabilitation depends on specific legal requirements

A foundation managing a school and a residence asks whether the subject passive investment applies to the construction of a dining room. The DGT responds that this rule applies only if the works meet the legal requirements for construction or rehabilitation of buildings.

The question raised

Application of the reverse charge mechanism rule provided for in Article 84.One.2º, f) of the Value Added Tax Law, as well as the tax rate applicable to the described operations.

The DGT's ruling

The reverse charge mechanism applies if the recipient is a businessperson or professional and the work involves urbanization, construction, or building rehabilitation. For it to be considered rehabilitation, the main object must be reconstruction (more than 50% of the cost in structural elements, facades, or roofs) and the cost must exceed 25% of the building's value. If the work does not meet these rehabilitation or construction requirements, the entrepreneur performing the work is the taxable person and must charge VAT to the applicant.

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