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Practical Handbook VAT 2022

Real-estate exemptions

The following transactions are exempt :

  • The supply of rural land and other land which does not have the status of building land and land intended exclusively for public parks and gardens or road surfaces for public use.

  • Second and subsequent supplies of buildings, including the land on which they are located, where they take place after their construction or renovation has been completed.

    Concept of rehabilitation of buildings:

    Building renovation works shall be considered to be those that meet the following requirements:

    1. That their main purpose is the reconstruction of the same, this requirement being understood to be met when more than 50 per cent of the total cost of the rehabilitation project corresponds to works of consolidation or treatment of structural elements, façades or roofs or to works analogous or related to the rehabilitation works.

    2. That the total cost of the works to which the project refers exceeds 25 per cent of one of the following amounts:

      • Of the purchase price, if the building was acquired during the two years immediately prior to the start of the renovation work.

      • The market value of the building or part of the building at the time of commencement of the renovation work, if the renovation work is commenced more than 2 years after the acquisition of the building.

        In both cases, the proportional part corresponding to the land shall be deducted from the purchase price or the market value of the building.

    The following works shall be considered analogous to refurbishment works:

    1. Structural conditioning work that enhances the building's safety, guaranteeing its stability and mechanical resistance.

    2. Reinforcement or conditioning work on the foundations and work affecting or consisting of the treatment of pillars or frameworks.

    3. Extension of constructed surface space, above or below ground floor level.

    4. Reconstruction work on façades and courtyards.

    5. Installation of lifting devices, including those designed to save architectural barriers for use by people with disabilities.

    The following shall be considered as works related to rehabilitation works

    Those listed below when their total cost is less than the cost of consolidation or treatment works on structural elements, façades or roofs and, where appropriate, works similar to these, provided that they are inextricably linked to them and do not consist merely of the finishing or ornamentation of the building or the simple maintenance or painting of the façade:

    1. Masonry, plumbing and woodwork.
    2. Work carried out to improve and adapt enclosures, electrical installations, water, air conditioning and fire extinguisher systems.
    3. Energy renovation work.

    Energy rehabilitation works shall be considered as energy rehabilitation works:

    Those aimed at improving the energy performance of buildings by reducing their energy demand, increasing the performance of thermal systems and installations or incorporating equipment using renewable energy sources.

    For the purposes of VAT are considered as first supplies:

    Supplies by the developer of buildings whose construction or renovation has been completed, unless they have been used for a period of 2 years or more and are acquired by a person other than the person who used them during that period.

    The exemption does not apply to supplies made by leasing companies in the exercise of the purchase option inherent in these contracts, provided that they have a minimum duration of 10 years, nor to supplies for immediate refurbishment or demolition and subsequent development.


    A developer has constructed a building for the following purpose:

    • The ground floor has been used as company offices since January "n".
    • The first has been rented to Mrs. A since February of the year "n".
    • The second has been rented to Mr. B since October of year "n".
    • The third has been rented to Mr. C since January of the year "n".
    • The room is unoccupied.

    He sells the entire building to Mrs. A in September of the year "n + 2". The following deliveries are produced:

    1. Subject to and not exempted as first deliveries:

      • The acquisition of the first flat rented by Mrs A herself, irrespective of the period of use.

      • The acquisition of the second flat which has been rented to Mr. B for a period of less than 2 years.

      • The acquisition of the fourth floor which has been unoccupied.

    2. They will be exempted as second deliveries:

      • The ground floor occupied by the developer himself for more than 2 years.
      • The third rented to Mr C for more than 2 years.
  • Leases and the constitution and transfer of rights in rem of enjoyment and use, which have as their object the following assets:

    1. Land, including agricultural buildings used for the operation of a farm.


      The transfer of a rural property to a trading company for marble quarrying is not exempted since the purpose of the transaction is the transfer of a right to quarry marble and to acquire ownership of it and not the simple transfer of the use of the land.

    2. Buildings or parts thereof intended exclusively for housing or for subsequent rental by entities managing public housing support programmes or entities under the special regime of entities dedicated to the rental of housing, including garages and ancillary annexes and furniture, rented together with them.


      The rental of a property by a company is not exempt from tax because it is not used exclusively for residential purposes as the lessee is a legal entity, regardless of whether it is used by the company, sublet or assigned to its employees as partial remuneration for their work.

The exemption does not include, among other things, the leasing of land for parking vehicles, for the deposit or storage of goods, for exhibitions or for advertising, nor the constitution or transfer of surface rights in rem.

Exemptions may be waived by the taxable person in respect of:

  1. Deliveries of land that cannot be built on.

  2. Second and subsequent deliveries of buildings.

The exemption can only be waived if the purchaser:

  1. Is a taxable person acting in the course of his business or professional activities.

  2. Is entitled to deduct all or part of the input tax incurred on the acquisition or, where this is not the case, the goods acquired are to be used, in whole or in part, in transactions giving rise to the right to deduct, depending on their foreseeable use.