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V5478-16 28 December 2016 · SG de Impuestos sobre el Consumo Criterion in force
IVA · inversión del sujeto pasivo

Application of passive party investment in construction and subcontracts

A subcontractor carrying out finishes, cladding and door installations in an industrial building asks whether passive party investment applies. The DGT confirms it does, if the conditions for carrying out construction or rehabilitation work are met.

The question raised

The application of the reverse charge mechanism regulated in Article 84.One.2, letter f), of Law 37/1992 is being questioned.

The DGT's ruling

The reverse charge mechanism applies when the recipient is a business or professional and the transaction constitutes a work execution (including supply with installation and assembly) within the framework of construction, rehabilitation, or urban development. The mechanism also applies to subcontractors if the contract derives from a main contract with these characteristics. The recipient must provide reliable notification that the transaction is carried out within said framework.

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