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V2694-18 5 October 2018 · SG de Impuestos sobre el Consumo Criterion in force
IVA · entrega de bienes

Works with materials may be subject to VAT if involving construction

A municipal commercial company asks about its VAT liability and deduction regime for services rendered to the local council. The DGT clarifies that liability depends on the nature of the operation and the activities carried out.

The question raised

Issue raised: Liability for Value Added Tax regarding its activity and the deduction regime.

The DGT's ruling

Construction works for building or rehabilitating structures involving the supply of materials exceeding 40% of the tax base are considered supplies of goods subject to VAT. Services provided by the entity to the City Council may be exempt from tax if the requirements of Articles 7.8. C) and D) of Law 37/1992 are met. Water distribution shall always be subject to the tax as it constitutes a business activity. For deductions, a reasonable and consistent imputation criterion must be applied to goods intended for both taxable and non-taxable operations, excluding amounts allocated exclusively to non-taxable operations.

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