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V2820-19 14 October 2019 · SG de Impuestos sobre el Consumo Criterion in force
IVA · patrimonio municipal del suelo

Delivery of urbanised land by a municipality is subject to 21% VAT and ITP exemption cannot be waived

A municipality asks whether the VAT liability applies to a land swap, whether the VAT paid is deductible, and whether the ITP exemption can be waived. The DGT states that the delivery of urbanised land constitutes an entrepreneurial activity subject to VAT and that the ITP exemption for public administrations cannot be waived.

The question raised

Regarding the liability and, where applicable, exemption from Value Added Tax on said transfers. Deductibility of the tax that the applicant may incur in the acquisition of the land. Where applicable, whether it is possible to waive the exemption for the "onerous transfers of assets" modality of the Transfer Tax and Documented Legal Acts Tax.

The DGT's ruling

The transfer of land by a City Council is a business activity subject to VAT if the land is urbanized or undergoing urbanization. Rural land acquired may be subject to but exempt from VAT if the transferor is a business entity. The deductibility of input VAT is governed by the pro rata rules for dual entities. It is not possible to waive the ITP exemption for Public Administrations as it would contravene the general interest.

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