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V2725-20 7 September 2020 · SG de Impuestos sobre el Consumo Criterion in force
IVA · exención

Leasing residential property to an entity for third-party use may be VAT exempt if the user is designated in the contract

A religious entity has enquired whether leasing a property to provide free accommodation to a minister of religion is exempt from VAT. The Directorate General for Taxes (DGT) has ruled that the exemption depends on whether the lessee acts as the final consumer or whether the contract specifically designates the individual who will occupy the property.

The question raised

Whether said lease is exempt from Value Added Tax.

The DGT's ruling

The leasing of a dwelling to a businessperson or professional who transfers its use to third parties is subject to and not exempt from VAT. However, the exemption applies if it is proven that there is no intention to exploit the property and the natural person who will be the ultimate user is specifically designated in the contract, without the power to sublease or designate others subsequently.

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