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V4618-16 31 October 2016 · SG de Impuestos sobre el Consumo Criterion in force
IVA · arrendamiento de viviendas

Leasing of residential properties for subsequent subletting is subject to VAT

A developer has enquired whether the rental of dwellings, garages, and storage rooms to a person who will subsequently sublet them is exempt from VAT. The DGT has ruled that, as there is a subsequent transfer for business exploitation, the transaction is subject to tax.

The question raised

Value Added Tax treatment of the lease of dwellings with garages and storage rooms to a natural person who will use them for subleasing and, where applicable, whether the regularization of input VAT incurred during the development is appropriate.

The DGT's ruling

The lease of buildings intended for residential use ceases to be exempt when the lessee performs a subsequent assignment in the course of a business or professional activity. In this case, the lease is taxable and not exempt, regardless of whether the subsequent assignment is through a new contract or another title. As it is a taxable operation, the regularization of input VAT incurred during the development of the property is not applicable.

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