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V3084-16 4 July 2016 · SG de Impuestos sobre el Consumo Criterion in force
IVA · primera entrega

Sale of a property following a lease with option to buy is deemed a first delivery and subject to VAT

A query was raised regarding whether the sale of a property by a developer, following a six-year lease with an option to buy, is exempt from VAT. The DGT has determined that, as it is a lease with an option to buy, the first delivery has not been exhausted, and the sale remains subject to the tax.

The question raised

Liability and possible exemption from Value Added Tax regarding the transfer of the dwelling.

The DGT's ruling

Lease agreements with an option to purchase are subject to and not exempt from VAT, therefore their use does not exhaust the first supply of the building. For the first supply to be exhausted, the property must have been used for a period equal to or greater than two years through lease agreements without an option to purchase. Consequently, the transfer of the dwelling by the developer following a lease with an option to purchase is considered a first supply and is subject to VAT.

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