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V4118-15 21 December 2015 · SG de Impuestos sobre el Consumo Criterion in force
IVA · permuta

Exchange of a building plot by a local council is subject to VAT

A local council has requested clarification on whether the exchange of a building plot from its municipal assets for another plot owned by a resident is subject to VAT. The Directorate General for Taxes (DGT) has ruled that the transaction is subject to the tax, as it is carried out in the course of a business activity and involves consideration.

The question raised

Liability for Value Added Tax on the delivery of the building plot carried out by the City Council.

The DGT's ruling

The management of municipal land assets constitutes a business activity; therefore, their transfers are business transactions. As it concerns a building plot (developable land), the exemption for rural land does not apply. The operation is subject to VAT as it is carried out for consideration through a barter transaction. The City Council must charge the general rate of 21%.

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