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Cost of Materials: 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

Refined position High confidence 8 rulings · 2014–2023

Current position

To apply the reduced rate of 10% in renovation and repair works of dwellings, the cost of materials must not exceed 40% of the tax base. This calculation includes all necessary materials and subcontracted works. The cost of materials is determined by its acquisition price from third parties or its production cost, regardless of the invoice price to the customer. If this limit is exceeded, the general rate of 21% applies to the entire operation.

The DGT has maintained the limit of 40% of the tax base for the cost of materials in renovation works, following a progressive increase from 33% in 2014. The evolution focuses on the precision of the calculation, establishing that subcontracted works must be included and that the cost is based on the acquisition or production price and not on the invoice price.

Turning points

  1. V2336-14

    Establishes that the cost of materials cannot exceed 33% of the tax base.

  2. V0182-15

    Raises the limit of the cost of materials to 40% of the tax base.

  3. V2900-21

    Specifies that the 40% limit includes subcontracted works and that the cost is computed by the acquisition or production price, regardless of the invoice price to the customer.

Analysis based on 8 of 8 rulings with a stated position. Updated 1 October 2026.

Rulings on this topic

8

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