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V3481-20 2 December 2020 · SG de Impuestos sobre el Consumo Criterion in force
IVA · rehabilitación de edificaciones

Handing over a property after renovation may be subject to VAT, while dissolution of co-ownership may incur ITP/AJD

Two siblings plan to merge two properties, carry out renovation works, and award themselves sole ownership. The DGT examines whether these operations are subject to VAT or ITP/AJD.

The question raised

Whether said operation would be subject to Value Added Tax or to Transfer Tax and Documented Legal Acts Tax.

The DGT's ruling

If the works constitute rehabilitation according to the qualitative and quantitative requirements of the VAT Act, the subsequent delivery following the termination of the co-ownership shall be the first delivery subject to VAT. Regarding ITP/AJD, the grouping and declaration of new construction are taxed by the variable AJD levy. The dissolution of the co-ownership is not a transfer if there is no excess in adjudication, being taxed only for AJD; if there is an excess compensated in cash due to indivisibility, it is taxed for AJD, but if the asset is divisible, the excess is taxed as an onerous transfer.

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