Back to index
V3400-20 23 November 2020 · SG de Impuestos sobre el Consumo Criterion in force
IVA · arrendamiento con opción de compra

VAT deductibility on real estate purchase options and regularisation obligations following exempt sales

A company sought clarification on whether it could deduct VAT on the transfer of a property after exercising a purchase option, and how this would affect regularisation if the asset were subsequently sold under an exemption. The DGT ruled that VAT is deductible provided the asset is used for business purposes, but an exempt sale necessitates the regularisation of the capital asset.

The question raised

Deductibility of the installment incurred as a consequence of the delivery derived from the early exercise of the purchase option. In this sense, consideration of the property as an investment asset as established in Article 108.One of Law 37/1992, despite having been transferred immediately after its acquisition, as it had been used for the applicant's business activity since the beginning of the financial lease contract. If applicable, the method for calculating the regularization period provided for in Article 107.Three of Law 37/1992.

The DGT's ruling

Lease with an option to purchase constitutes a provision of services until the exercise of the option is committed, at which point it becomes a delivery of goods. Financial lease installments are deductible if the property is used for business activities. If the property is transferred under the exemption provided in Article 20.One.22, the regularization of the investment asset must be carried out pursuant to Article 110, considering that the asset was used exclusively in transactions without the right to deduction during the year of transfer and the following eight years.

Book your free first meeting