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V2694-17 23 October 2017 · SG de Impuestos sobre el Consumo Criterion in force
IVA · permuta

Exchange of a plot for future construction by a local council is subject to VAT

A local council is exchanging a plot of land, acquired through compulsory transfer, in return for houses and premises to be built. The DGT has ruled that the transaction is subject to VAT as it is carried out in the course of managing the municipal land estate.

The question raised

Treatment for Value Added Tax purposes. Liability for Transfer Tax on Onerous Transfers.

The DGT's ruling

The transfer of land by the City Council is subject to VAT because the municipal land assets constitute business assets. The transaction is onerous as it is carried out through consideration in kind (future works). The accrual occurs when the land is made available to the acquirer, the moment at which the advance payment for the future building also accrues. The transfer is not subject to ITPAJD as it is subject to VAT.

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