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V5127-16 28 November 2016 · SG de Impuestos sobre el Consumo Criterion in force
IVA · inversión del sujeto pasivo

Reverse charge mechanism does not apply to the mere supply of materials without installation or assembly

A query was raised regarding whether the reverse charge mechanism applies to construction and subcontracting contracts, including the supply of materials without assembly. The DGT ruled that the reverse charge applies to the execution of works, but not to the simple supply of materials without installation.

The question raised

Whether the application of the reverse charge mechanism is appropriate in the contractual relationship between the developer and the consulting company for the totality of the operations performed, as well as in the contractual relationship between the consulting company and the subcontractors, including cases involving the supply of materials without installation and assembly. Finally, if the reverse charge mechanism is not applicable to the supply of materials without installation and assembly, the impact of this circumstance on the consideration of the developer as the taxable person for the entirety of the execution of works contracted with the consulting company.

The DGT's ruling

The reverse charge mechanism applies when the work as a whole constitutes construction, rehabilitation, or urbanization and the contract is for the execution of works. The supply of goods intended for installation and assembly in building construction is considered the execution of works. The mere supply of materials without installation or assembly is not considered the execution of works; therefore, the reverse charge mechanism does not apply in such cases.

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