External machinery and equipment will not be taxed in the ICIO if they are not inseparable from the work

The determination of the taxable base for the Tax on Constructions, Installations, Works and Repairs (ICIO) often raises doubts when the work includes the installation of technical machinery or specialized equipment. The General Directorate of Taxes (DGT) has clarified the scope of this tax to avoid the inclusion of costs that do not correspond to the construction itself.

What the DGT has resolved

The DGT clarifies that the cost of equipment and machinery manufactured by third parties outside the work site must be excluded from the ICIO taxable base. However, this criterion includes an important exception: the cost of installing such elements must be included in the tax.

For a technical element to be included in the taxable base, it must meet three concurrent requirements:

• Be a technical element inseparable from the work.
• Be integrated into the urban planning license project.
• Serve to provide essential services for the habitability or use of the property.

Conversely, the administration establishes that the value of machines that are only relevant for obtaining an activity or operating license, but lack relevance for the urban planning license, should not be included.

What this means for you

If your company is carrying out renovations, installations, or constructions that require a works license, this criterion directly impacts the project's tax burden. The distinction between what is part of the construction and what is external technical equipment allows for a clearer delimitation of the taxable base.

Companies acquiring externally manufactured machinery can prevent the purchase value of such equipment from increasing the tax, provided that the condition of technical inseparability and its link to the urban planning license are met. It is essential to distinguish between machinery necessary for the use of the building and that which is only necessary for the exercise of a specific commercial activity.

What you should do

For large-scale projects involving complex technical installations, it is necessary to perform a detailed breakdown of costs. You must identify which elements are part of the urban planning execution project and which are merely activity assets. Assessing each case individually with the project's technical documentation is the way to ensure that the ICIO taxable base is calculated correctly.