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V5445-26 6 August 2026 · SG de Impuestos sobre el Consumo Criterion in force
IVA · deducción de cuotas

VAT paid on urbanisation works is deductible if intended for a taxable activity

A natural person owning land being urbanised through a Compensation Board has asked whether the VAT on the works can be deducted. The DGT has ruled that, as there is an intention to sell the resulting plots (urbaniser activity), the VAT amounts are deductible provided that the intention to use them for said business activity is demonstrated.

The question raised

Deductibility of the Value Added Tax amounts incurred by the consultant in the execution of the urban development works of the referred lands.

The DGT's ruling

The consultant holds the status of entrepreneur or professional when carrying out urban development with the intent to sell. The VAT amounts incurred in the urban development works are deductible if they are allocated to a taxable and non-exempt business activity, such as the transfer of the resulting plots. For amounts incurred before the commencement of the activity, it is necessary to prove the intention to allocate them to said activity through objective elements.

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