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V2604-24 18 December 2024 · SG de Impuestos sobre el Consumo Criterion in force
IVA · comunidad de bienes

Property community can deduct VAT on renovation works and charge it on rent to manager

A property community asks whether it can deduct VAT on renovation works and whether it must charge VAT on renting to a management company. The DGT responds that, as the community is a VAT liable entity carrying out business activity, it may deduct VAT and must charge it on the rental.

The question raised

Taxation of the operation under Value Added Tax. Specifically, whether the community of property can deduct the tax incurred in the rehabilitation works and whether it must charge said tax to the management company lessee.

The DGT's ruling

A community of property is a taxable person for VAT purposes if it organizes means and assumes the risk of the activity jointly and independently of its members. The leasing of apartments to a management company for subsequent subleasing is subject to the general rate of 21%, as it does not meet the exemption for leases intended for subleasing. By carrying out taxable and non-exempt operations, the community is entitled to the deduction of the amounts incurred in the rehabilitation of the property.

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