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V5435-16 23 December 2016 · SG de Impuestos Patrimoniales, Tasas y Precios Públicos Criterion in force
IVA · permuta

Termination of land swap for future construction does not constitute a transfer of assets for ITP or IIVTNU

A company seeks to partially terminate a land swap agreement for future buildings, replacing the delivery of works with a cash indemnity. The DGT rules that this termination does not constitute a transfer of real estate for ITP or IIVTNU purposes, but requires the rectification of VAT previously charged due to the advance payment.

The question raised

Yes, given that there is no transfer of any real estate, as there has been no other asset other than the original land which was taxed at the time the company acquired it, the annulment of the exchange can be considered an act not subject to Transfer Tax and Documented Legal Acts Tax, nor to the Tax on the Increase in Value of Urban Land.

The DGT's ruling

The termination of the contract does not give rise to a transfer of real estate, and therefore is not subject to Transfer Tax (ITP) or the Tax on the Increase in Value of Urban Land (IIVTNU). Regarding VAT, the amount initially charged for the advance payment of the future building must be rectified by means of a credit note. The entity must regularize the situation in the corresponding tax return and refund the amounts to the recipient.

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