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V3083-20 14 October 2020 · SG de Impuestos sobre el Consumo Criterion in force
IVA · inversión del sujeto pasivo

Installation may qualify for passive investor investment if deemed execution of construction or rehabilitation work

The consultant asks whether the installation of agricultural machinery constitutes execution of work to qualify for passive investor investment. The DGT responds that such qualification applies if the installation is not merely a supply, becomes part of the property, and is carried out within a construction or rehabilitation project.

The question raised

The applicant asks whether the installation of machinery is considered a works contract for Value Added Tax purposes and the possibility of applying the reverse charge mechanism provided for in Article 84. One. 2º, f) of the Value Added Tax Law.

The DGT's ruling

For the reverse charge mechanism to apply to the taxable person in works contracts, the recipient must be a business person, the operation must involve urbanization, construction, or rehabilitation, and the activity must be of a works contract nature. A works contract implies obtaining a good distinct from those used for its execution. The installation of machinery shall constitute a works contract if it is not a mere supply and becomes incorporated into the real estate, provided it is carried out within the framework of a construction or building rehabilitation project.

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