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V2910-20 25 September 2020 · SG de Impuestos sobre el Consumo Criterion in force
IVA · inversión del sujeto pasivo

Inversion of the passive party applies to direct construction contracts

The consultant asks whether the inversion of the passive party in VAT applies when a developer directly contracts multiple main contractors for building a workshop. The DGT confirms that the conditions for applying this mechanism are met.

The question raised

Applicability of the reverse charge mechanism established in Article 84.One.2.f) of Law 37/1992, on Value Added Tax, when the execution of works is contracted directly between the developer and the main contractors of each specialty.

The DGT's ruling

The reverse charge mechanism applies when the recipient is a business or professional, the operation constitutes urban development, construction, or rehabilitation, and is characterized as the execution of works. This mechanism applies to contracts directly entered into between the developer and the main contractor. It also applies to subcontractors if the works result from a main construction or urban development contract. Where there are multiple contractors, the relevant factor is that the works as a whole constitute construction or urban development, without each individual execution needing to be so separately.

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