For the correct identification of the Spanish taxes derived from the purchase of a plot or land intended for construction, several factors must be taken into account:
- Tax status of the seller
- Tax status of the buyer
- Nature or urban classification of the land or plot
- Nature or urban classification of the construction
NATURE OF THE SELLER
In these cases, we must differentiate between:
Private seller or natural person:
In these cases in which the owner of the land is an individual or natural person, the transaction is not subject to the Spanish VAT, but to the Transfer Tax (ITP).
However, given the above, it must be put before that the seller, at all times, should not act as an “entrepreneur”. This is important when we talk about DEVELOPABLE land (“Urbanizable”) or IN THE PROCESS OF URBANIZATION, since the Spanish VAT Law expressly indicates that those individuals who promote the urbanization of land or developable plots, will be considered as “entrepreneurs“, and therefore, if they sell said plots before the end of the urbanization process, said sale would be subject, and not exempt, from VAT.
Entrepreneur, company or professional seller:
When the seller of the land is an entrepreneur or professional we must differentiate according to the nature of the land object of sale.
Urbanizable, buildable or with buildings under construction:
When it comes to any of the following types of land:
- Building land (plot or any other with an administrative license to build).
- Land in the process of urbanization
- Land developed or in the process of urbanization (except those destined to parks and public gardens or roads for public use).
- Land (including non-buildable) with buildings under construction (except constructions of an agrarian nature, paralyzed, demolished or ruinous).
In these cases, the delivery of the land is subject to VAT, so the entrepreneur must issue an invoice with VAT (at 21%), whatever the condition of the buyer.
Rustic or non-buildable land
In the case of rural land (including agricultural buildings) or other non-building buildings (including those intended for public parks and gardens or roads for public use), its sale is subject to and exempt from VAT, although if the buyer is an entrepreneur who can deduct all or part of the input VAT he can waive the exemption and pay VAT (at 21%) instead of ITP.
“Buildable” means land on which there is the “possibility of building“. This possibility of building is demonstrated by the fact that there is a building license on it. Then, in these cases, if the seller is an entrepreneur, we would be facing a case of sale subject to VAT at 21%.
If the exemption is waived, the purchasing entrepreneur must declare the VAT due for the taxpayer’s investment, in boxes 12 and 13 of form 303 (if included in the Simplified Regime, in box 53).
For his part, the selling entrepreneur must declare the tax base in box 61 of form 303.
If there is no waiver of VAT exemption, the buyer must pay the amount corresponding to the ITP by submitting form 600 within one month of signing the contract of sale or notarial deed, without prejudice to the discounts that may be applicable.
In any case, the seller will inform of the sale in form 390 (box 105 and, in addition, box 107 if it is an investment good or box 106 when it is an unusual operation).
If you are exempt from filing form 390, you will enter the tax base of the sale in the fourth quarter / month of December of form 303 in box 83 and, in addition, in box 99 if it is an investment good or in box 79 when it is an unusual operation.
On the other hand, the invoice issued by the selling entrepreneur does not carry VAT.
Depending on the case, the invoice must include the following mention:
- If the buyer of the land does not waive the exemption, he must include a reference to article 20.One.20 of Law 37/1992 and/or indicate that the operation is exempt (art. 6.1.j) of Royal Decree 1619/2012, of 30 November).
- If the owner of the land waives the exemption, he must indicate the words “reverse charge of the taxable person” (art. 6.1.m) of Royal Decree 1619/2012).