Transfer of a dwelling following an asset transfer will be subject to VAT

The nature of global transfers of assets and liabilities raises doubts regarding the application of the VAT exemption in subsequent transfers of the assets that make up said economic unit. Recently, the Dirección General de Tributos (DGT) has specified the applicable tax treatment when a dwelling is transferred after having been part of an asset transfer not subject to the tax.

What the DGT has resolved

The inquiry analyzes whether the global transfer of an economic unit, carried out under the assumption of non-subjectivity provided for in Article 7.1º of Law 37/1992, exhausts the possibility of applying the exemption to the subsequent transfer of the real estate. The Administration's criterion establishes that, if the initial acquisition of the real estate was carried out without being subject to the tax because it was part of an asset transfer, the subsequent transfer of the dwelling is not considered a second exempt supply.

Consequently, the transfer of the real estate is classified as a first supply of goods subject to VAT. This criterion also extends to lease agreements with a purchase option, where the supply of goods occurs at the moment the lessee exercises said option.

What it means for you

This ruling has direct implications for both companies managing economic units and individuals in buying and selling processes:

• For companies: The transfer of real estate that was part of a previously transferred economic unit cannot benefit from the VAT exemption, as it is not considered a second transfer.
• For individuals: If you exercise a purchase option on a dwelling, the operation will be subject to VAT. The tax rate will depend on the nature of the property:

• 4% VAT: If it is social housing (whether under a special regime or public promotion).
• 10% VAT: In all other cases of dwellings that do not meet the previous condition.

What should be done

Given the complexity of determining whether an asset transfer operation fits the assumption of non-subjectivity and how this conditions the future tax burden, it is necessary to evaluate the structure of the transaction before its execution. The correct classification of the supply will determine the final cost of the acquisition of the dwelling or the tax burden of the transfer of the asset.