Individuals in self-build projects may apply the 10% reduced VAT rate

The application of the reduced rate of Value Added Tax (IVA) in the construction of buildings intended for housing is a key aspect for the financial planning of residential projects. Recently, the Dirección General de Tributos (DGT) has clarified the requirements necessary for this reduction to be applicable in construction execution operations.

What the DGT has ruled

The inquiry addresses whether it is possible to apply the 10% rate in the construction of buildings intended primarily for housing when the operation is formalized directly between the developer and the contractor. The administration's criteria establish that suitability for housing use does not mandatory require the existence of a certificate of habitability or an occupancy license prior to the moment of execution.

According to the DGT, the status of housing is derived from the objective characteristics of the design, construction, and legal purpose of the property. Therefore, the reduced rate is applicable as long as the building is intended for this purpose, and the interested party must prove such suitability through the means of proof admitted in Law.

What it means for you

This criterion has a direct impact on individuals who decide to undertake self-build projects. If you act as the developer of your own home, you may contract the services of a construction company applying the 10% rate instead of the general rate, provided that the project meets the technical characteristics of a dwelling.

For construction companies, this pronouncement offers legal certainty when invoicing individual clients or developers, as the absence of certain administrative occupancy documents does not prevent the application of the reduced rate, provided that the building's purpose is clearly residential due to its design and regulations.

What should be done

To ensure the application of this tax benefit, it is fundamental that the construction project is aligned with urban planning regulations and the technical characteristics of a dwelling. It is necessary to have the technical documentation that demonstrates the residential purpose of the property, as the burden of proof lies with the party requesting the application of the reduced rate. It is recommended to assess each project individually to ensure that the documentation provided is sufficient in the event of an inspection by the Tax Agency (Agencia Tributaria).