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V3440-20 27 November 2020 · SG de Impuestos sobre el Consumo Criterion in force
IVA · autoconsumo

IVA on rented properties not deductible if affectation changes to rental sector

A real estate developer asks whether IVA on properties acquired for rehabilitation and resale, but currently rented, is deductible. The DGT responds that actual rental constitutes a change of affectation to a distinct sector, resulting in self-consumption.

The question raised

Question posed: The regime of deductions applicable to Value Added Tax incurred as a consequence of the acquisition of real estate by the applicant for its rehabilitation when there are dwellings that are leased at the time of purchase.

The DGT's ruling

The effective use of dwellings for leasing constitutes a change of use from one sector (development) to another distinct sector (leasing). As the activity of residential leasing has a deduction rate of 0%, the VAT incurred on such dwellings shall not be deductible. In the event that the dwelling is ultimately sold, the corresponding adjustment must be made if it is within the adjustment period.

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