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V2719-20 4 September 2020 · SG de Impuestos sobre el Consumo Criterion in force
IVA · deducción

Deductibility of VAT on property purchases depending on use and activity

A company that rents out and sells offices and premises, and also acts as a real estate intermediary, seeks clarification on the deductibility of VAT incurred on property acquisitions. The DGT states that deductibility will depend on whether the properties are used in operations entitled to deduction, such as office leasing or real estate brokerage.

The question raised

Deductibility of Value Added Tax incurred on the acquisition of real estate.

The DGT's ruling

The input tax incurred on the purchase of real estate is only deductible if used in transactions that are taxable and not exempt, or exempt with the right to deduction, such as the rental of offices or real estate brokerage. If activities with different deduction regimes exist, it must be determined whether there are differentiated sectors or if the pro rata rule applies. Input tax incurred before the commencement of activity may be deducted on a provisional basis.

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