VAT on construction works with materials is accrued when goods are made available to the client

Determining the exact moment when the obligation to declare and settle Value Added Tax (VAT) arises is a critical aspect of financial management for companies in the construction sector. A recent resolution from the Dirección General de Tributos (DGT) specifies the rules applicable to construction works that include the provision of materials by the contractor.

What the DGT has ruled

The administration has clarified that, in construction execution operations where materials are provided to non-administrations, the accrual of the tax occurs at the moment the goods are made available to the owner of the work, allowing them the use and enjoyment of said goods.

Likewise, the ruling addresses the situation of advance payments made through construction certificates. In these cases, the tax is accrued at the moment of the effective collection of such amounts. It is fundamental to highlight that the mere issuance of a construction certificate does not determine the accrual of VAT; this only occurs if there is a real payment associated with said certificate.

What this means for you

For construction and renovation companies, this criterion establishes a clear distinction between the technical management of the work and the tax management. It is not enough to issue documents certifying the progress of the works or the delivery of materials to generate the tax obligation.

The operational impact focuses on two scenarios:

• Delivery of materials: VAT must be declared when the client has the capacity to dispose of the supplied materials.
• Construction certificates: Accrual is linked to cash flow. If a certificate is issued but the client does not make the payment, there is no tax accrual at that moment.

What should be done

Companies must ensure correct synchronization between their construction certification processes and their tax accounting. It is necessary to verify that the issuance of invoices and the declaration of VAT coincide with the moment the goods are made available or with the effective collection of the certified amounts, thereby avoiding errors in the settlement of the tax or in the exercise of the right to deduct input VAT.