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V3026-21 3 December 2021 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · permuta

Exchanging a plot of land with a local council triggers Capital Gains Tax and may be subject to VAT

An individual has requested clarification on the tax treatment of exchanging a plot of land they own for another property owned by a local council. The Tax Agency has determined that the transaction results in a capital gain or loss for Personal Income Tax (IRPF) purposes and has analysed whether the council's transfer is subject to VAT.

The question raised

Tax treatment in Personal Income Tax for the taxpayer, and the subjection of the operation to Value Added Tax.

The DGT's ruling

In Personal Income Tax, the exchange of a plot not affecting an economic activity generates a capital gain or loss based on the difference between the acquisition value and the higher of the market value of the asset delivered or the asset received. Regarding VAT, the transfer by the City Council is subject to the tax as it is part of its activity of managing the municipal land heritage, although it will be exempt if the transfer occurs before the start of the material urbanization of the land.

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