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V2972-16 27 June 2016 · SG de Impuestos sobre el Consumo Criterion in force
IVA · urbanización de terrenos

Levies for urbanisation via cooperation schemes are subject to VAT and may allow for reverse charge mechanism

A City Council has requested clarification on the VAT treatment of urbanisation works carried out through a cooperation scheme and the collection of levies from property owners. The DGT has determined that these operations are subject to VAT and that owners may act as taxable persons under the reverse charge mechanism if they are operating as businesses.

The question raised

1.- Treatment of the operation within the scope of Value Added Tax.

The DGT's ruling

The execution of urbanization works by a City Council through a cooperation system attributes to it the status of a business person. The assessments collected from owners constitute the consideration for said works and are subject to VAT. If the owners act as business persons with the intention of allocating the land to professional activity, they shall be taxable persons under the reverse charge mechanism. In this case, the City Council must be formally notified of such status so that the tax amount is not charged.

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