Recently, the General Directorate of Taxes (DGT) has issued a new Binding Consultation, the V-0419-23 on taxation for the sale of a renovated storage room in a commercial premises to clarify whether the operation would be subject to and not exempt from VAT; or, on the contrary, it would be subject to ITP.
According to the consultation itself, «the consultant is a commercial entity whose activity consists of the promotion, construction and operation, among others, of all types of furniture and real estate operations related to construction. The entity acquired a commercial premises from another commercial entity, which was object of reform for the construction of storage rooms that are going to be sold.
It must be taken into account that, in accordance with article 4 and 5 of the Law 37/1992, of December 28, on Value Added Tax (BOE of December 29), the consultant has the business or professional status and the deliveries of goods and services that you carry out in the exercise of your business or professional activity in the territory of application of the Tax will be subject to Value Added Tax.
In accordance with article 20.One.22 of Law 37/1992, they will be second and subsequent deliveries of buildings are exempt from the Tax, including the land on which they are located, when they take place after their construction or rehabilitation has been completed.
As indicated in the consultation itself, the DGT has stated, among others, in the binding response of October 3, 2016, number V4208-16, that for the purposes of classifying a delivery of buildings as first or second or subsequent delivery and applying, In your case, the aforementioned exemption, it is an essential requirement that it be a building whose construction or rehabilitation is completed.
Consequently, as seems to be deduced from the consultation document, when the commercial premises were acquired by the consulting company from its previous owner, was acquired by virtue of a second or subsequent delivery, subject to and exempt from Value Added Tax.
In these circumstances, the delivery of the storage rooms that the consulting entity is now going to carry out would be considered first delivery of the same if the works carried out in the premises that have been transformed into storage rooms are considered rehabilitation works for the purposes of the Tax.
For these purposes, article 20.Uno.22º.B) of the Tax Law must be taken into account to know in detail whether or not the work is a rehabilitation work for VAT purposes because, in these circumstances, the delivery of the storage rooms that the consulting entity is now going to carry out would be considered first delivery of the same if the works carried out in the premises that have been transformed into storage rooms are considered rehabilitation works for the purposes of the Tax. If the work carried out on the premises for its transformation into storage rooms meets the above requirements to be considered rehabilitation work, the subsequent delivery of the buildings resulting from the work carried out will be subject to and not exempt from Value Added Tax as it is a first building delivery made by its developer.
On the contrary, if the work carried out does not meet the requirements set out to be considered rehabilitation, the transfer of the storage rooms will be considered as second or subsequent delivery of buildings exempt and the same will be subject to the concept of "onerous property transfers" of the Tax on Property Transfers and Documented Legal Acts, in accordance with the provisions of article 4.Four of the Value Added Tax Law, unless there is a waiver of the exemption.
Don't miss all the latest news in the Financial area from the best professionals in the sector in our Master in Financial Management, Accounting and Management Control.
