ICIO includes technical elements inseparable from the construction project

The determination of the taxable base for the Tax on Constructions, Installations, Works, and Repairs (ICIO) is a recurring point of friction in local tax management. A recent binding ruling from the General Directorate of Taxes (DGT) has clarified the treatment of those technical elements which, although they may seem accessory, are indissolubly integrated into the construction project.

What the DGT has resolved

The question posed focused on whether certain devices and technical elements intended for a sports center should be computed within the taxable base of the tax. After analyzing the regulations, specifically the Recast Text of the Law Regulating Horizontal Property (TRLRHL RD Leg. 2/2004), the DGT has established that elements that are technically inseparable from the work and form an integral part of the project must be included in the tax calculation.

The criterion is based on the nature of the construction and how these elements become part of the technical unit of the building. If the element cannot be separated without altering the structure or the essential functionality of the projected work, its value must be taxed.

What this means for you

This criterion has a direct impact on the tax burden of the following entities:

• Companies: Entities executing renovations or construction of installations subject to a planning license must consider the cost of the technical elements integrable into the construction budget for the calculation of the ICIO.
• Individuals: Natural persons carrying out works or installations subject to a building license must be aware that the cost of devices integrated into the structure will affect the final amount of the municipal tax.

What should be done

When executing projects that include complex installations, it is necessary to perform a prior technical analysis to distinguish between those elements that are merely furniture or independent equipment and those that constitute technical elements inseparable from the work. The correct classification of these costs in the technical project is fundamental to avoid discrepancies with the local administration during the tax assessment. It is recommended to assess each case individually according to the nature of the installation.