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V2925-23 31 October 2023 · SG de Impuestos sobre el Consumo Criterion in force
IVA · urbanización

Transfer of land requiring new development is VAT exempt if construction has not commenced

A real estate developer has requested clarification on whether the transfer of a plot of land is subject to or exempt from VAT. The DGT has ruled that the tax treatment depends on whether physical development works have begun or if the transferor has incurred costs for the physical transformation of the land.

The question raised

1.- Whether the supply of said plot would be subject to and, where applicable, exempt from Value Added Tax.

The DGT's ruling

If the transfer occurs before the commencement of material urbanization or without the transferor having incurred physical transformation costs, the land is considered rural and the supply is exempt. If works have commenced or urbanization costs have been incurred, the land is considered in the process of urbanization and the supply is subject to VAT. Land that is already buildable or plots are subject to the tax by express exclusion of the exemption.

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