The transfer of garage spaces from municipal land heritage will be exempt from VAT

The legal nature of the assets that make up the municipal land heritage has raised doubts regarding their tax treatment in transfer operations. Recently, the Dirección General de Tributos (DGT) has clarified the classification of these operations within Value Added Tax (IVA).

What the DGT has resolved

The advisory body has determined that the assets of the municipal land heritage form part of business assets. For this reason, both their management and their transfer are considered operations subject to IVA.

However, the ruling establishes a fundamental nuance: as these are second or subsequent deliveries of buildings, the operation must be classified as exempt. This criterion is based on Article 20.One.22º of Law 37/1992. Nevertheless, the regulations allow the taxable person to waive this exemption in the event that the acquirer is a taxable person with the right to deduction.

What this means for you

If you are involved in the acquisition or transfer of garage spaces originating from this type of heritage, you should consider two scenarios:

• Exemption scenario: As a general rule, the operation will not trigger IVA as it is considered a subsequent delivery of the building.
• Taxable scenario: If the buyer is a professional or a company with the right to deduct the tax, there is the possibility of waiving the exemption so that the operation is subject to IVA, thereby allowing for the recovery of said tax.

What is advisable to do

Given the possibility of waiving the exemption, it is necessary to analyze the tax status of the acquirer before formalizing the operation. The decision to apply the exemption or subject the sale to IVA will directly impact the tax burden of the transaction and the deduction capacity of the parties involved. It is recommended to assess the situation of each operation to determine which treatment is most appropriate according to the buyer's profile.