Self-built homes may be subject to 10% VAT without a certificate of occupancy

The application of the reduced tax rate in the construction of buildings intended for housing has raised doubts when the property does not yet have the definitive administrative documentation. The Directorate General of Taxes (DGT) has recently clarified the scope of this tax benefit within the framework of self-promotion of housing.

What the DGT has resolved

The inquiry analyzes whether the construction of a home can be taxed at the reduced rate of 10% in accordance with Article 91.Uno.3.1.º of Law 37/1992 on Value Added Tax (IVA). The binding body determines that the reduced rate applies to the execution of construction or rehabilitation works of buildings intended primarily for housing.

The fundamental criterion is that suitability for residential use is an objective circumstance. This condition is derived from three elements:

• The design of the building.
• Its construction.
• The possible legal use of the property.

Therefore, the application of this tax rate is not conditioned on the property having a certificate of occupancy or an occupation license at that moment.

What this means for you

For individuals who decide to undertake the self-promotion of a home, this resolution provides significant legal certainty. It means that the tax savings derived from the reduced 10% rate are applicable from the execution phase of the work, provided that the project is intended to be a home.

However, the absence of a certificate of occupancy does not exempt one from the burden of proof. The Administration will require the interested party to provide means of proof justifying that the building is, indeed, suitable for residential use.

What should be done

In this scenario, it is necessary to ensure that all technical documentation and the execution project clearly reflect the residential vocation of the property. The means of proof must be sufficient to demonstrate to the Administration that the design and construction allow for residential use, regardless of pending administrative occupation procedures.