Doctrine by topic · DGT Observatory

Material Execution Cost: DGT doctrinal evolution

How the DGT's position on this topic has evolved, and the rulings it rests on.

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How the DGT's position has evolved

Settled doctrine High confidence 9 rulings · 2017–2025

Current position

The taxable base for the ICIO (Tax on Construction, Installations and Works) is the material execution cost of the work, excluding VAT, fees, industrial profit, general expenses, or safety, hygiene, or quality control expenses. The value of machinery or installations constructed by third parties outside the work is excluded, but their installation cost is included. Only inseparable elements that appear in the project, lack their own identity, and provide essential services for habitability or use are integrated.

The DGT's position remains constant regarding the definition of material execution cost. Throughout the rulings, the exclusion of elements constructed outside the work has been specified, and the requirement that included elements appear in the project and be inseparable from the construction has been reinforced.

Turning points

  1. V3032-17

    Defines the real and effective cost as that which represents an expense for the taxpayer, excluding free labor.

  2. V3306-19

    Explicitly establishes that VAT, professional fees, business profit, or taxes are not included.

  3. V0173-22

    Details that industrial profit, general expenses, safety, hygiene, and quality control do not form part of the taxable base.

Analysis based on 7 of 9 rulings with a stated position. Updated 29 September 2026.

Rulings on this topic

9
V3032-17 22 Nov 2017

Unpaid labour is excluded from the ICIO taxable base

SG de Tributos Locales
iciobase imponiblecoste real y efectivocoste de ejecución materialsujeto pasivo TRLRHL — RDLeg 2/2004 de Haciendas Locales art. 100TRLRHL — RDLeg 2/2004 de Haciendas Locales art. 101
Affects CompanyExpat · Non-residentIndividual
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