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V2738-23 9 October 2023 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · amortización

Whether IVA on home construction is deductible depends on whether the works are investment assets and used for taxable activities

A craftsman asks if he can deduct IVA for building a concert area in his home patio. The DGT states that deduction is only allowed if the works are investment assets and are used for taxable activities, such as free demonstrations to promote instruments.

The question raised

"Deductibility for Personal Income Tax and VAT purposes of masonry materials and services for the construction of an area enabled for performing concerts in the backyard of the premises where the self-employed activity is carried out, which is also the residence of the self-employed individual, although the personal and business spaces are clearly differentiated. The purpose of the construction of this space is to promote baroque music and, through it, its instruments. The artisan needs to promote themselves and maintain fluid contact with musicians, as they are the ones who value and critique the instruments, and through whom new contacts for the sale of products are obtained. The interested party will not charge any admission fee for the concerts that may take place, although they consider the possibility of organizing classes and talks by hiring professional musicians to teach them. A new activity for which they would register at the appropriate time and would be taxed accordingly for charging for the organization of those classes."

The DGT's ruling

For VAT purposes, input tax shall only be deductible if the work constitutes a capital good used in the activity, or if it pertains to real estate partially used for business purposes. If the concerts are free of charge for promotional purposes, the tax may be deductible subject to certain requirements. For Personal Income Tax (IRPF), the construction in the courtyard is deductible through depreciation if it is a divisible asset capable of separate and independent use from the dwelling.

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