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V3386-20 19 November 2020 · SG de Impuestos sobre el Consumo Criterion in force
IVA · terreno urbanizable

VAT applicability on land transfers depends on urban planning status at the time of sale

An individual has requested clarification on whether purchasing developable land from a commercial entity is subject to VAT or Stamp Duty (ITP). The Directorate-General for Tax (DGT) ruled that the tax treatment depends on whether the land is classified as rural, undergoing urbanisation, or is already a building plot.

The question raised

Whether said supply would be subject to Value Added Tax or to the "onerous property transfers" modality of the Transfer Tax and Documented Legal Acts Tax. If applicable, the applicable Value Added Tax rate.

The DGT's ruling

The supply of rural land is exempt from VAT. If the land is undergoing urbanization or is already urbanized but is not buildable, it shall be subject to VAT if the transferor has incurred physical transformation costs or if material works have commenced. If the land is already a building plot or buildable with a license, the supply is subject to VAT at the general rate of 21%.

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