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V2982-19 25 October 2019 · SG de Impuestos sobre el Consumo Criterion in force
IVA · comunidad de propietarios

Homeowners' associations must charge VAT on common area rentals, not on service charges

A homeowners' association enquired whether VAT should be applied to the distribution of common expenses and if co-owners can deduct it. The DGT ruled that the distribution of expenses is a final consumer activity exempt from VAT, whereas the rental of common areas to third parties is subject to the tax.

The question raised

Question posed: Whether the consultant holds the status of a taxable person or professional for Value Added Tax purposes, as well as whether, in the distribution of building expenses (such as maintenance of common elements, utilities, or services such as concierge and administration), Value Added Tax must be charged to the co-owners and whether they may deduct it.

The DGT's ruling

The homeowners' association acts as the final consumer in the distribution of common expenses; therefore, it must not charge VAT nor can it deduct it. However, if it leases common areas to third parties, it acts as a taxable person and must apply the general rate of 21%. For co-owners who are taxable persons to deduct the VAT on community expenses, the invoice must itemize the proportional base and tax amount for each one. The jurisprudential alternative of the CJEU is not applicable because the community does hold the status of a taxable person in its leasing activity.

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