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V3189-21 23 December 2021 · SG de Impuestos sobre el Consumo Criterion in force
IVA · justiprecio

Urbanised plots delivered under expropriation subject to 21% VAT

A local council delivers urbanised plots to a regional council as payment for a just price arising from expropriation. The DGT rules that the operation is VAT liable because the management of municipal land assets constitutes an entrepreneurial activity and the plots are urbanised.

The question raised

Whether the operation under consultation is subject to and not exempt from Value Added Tax and, where applicable, whether the Provincial Council could deduct the tax incurred by said operation and within what timeframe. Or, conversely, whether the operation under consultation should be taxed under Transfer Tax and Documented Legal Acts Tax.

The DGT's ruling

The delivery of urbanized land by a city council constitutes a business activity of managing municipal land assets, and therefore the operation is subject to VAT. As it is subject to VAT, the transfer is not subject to Transfer Tax and Documented Legal Acts Tax. The provincial council may deduct the input VAT provided that the plots are used for activities that generate a right to deduction, applying the pro rata rule if exempt operations are involved.

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