According to a ruling by the Central Economic Administration Court the certification requirement for the waiving of the VAT exemption by the seller does not mean said waiver must appear in a public deed

14 April 2009

The administrative court’s ruling on May 3, 2007 was in response to an appeal filed against a property conveyance and documented legal act tax (known by the Spanish acronym ITP) liquidation. The competent tax authorities had determined that the conveyance of various industrial warehouses by the claimant was subject to the ITP instead of VAT since the VAT exemption waiver employed by the buyer was not recorded in a public deed.

It should be remembered that Art. 20.1.24 of the VAT law establishes the tax exemption for secondary and subsequent property transfers made after the construction or rehabilitation has been concluded which are then only subject to ITP. However, Art. 20.2 of the Act allows the taxpayer who is entitle to a full deduction for VAT borne and who is acting in their business or professional capacity, to waive the exemption, leaving the transaction subject to VAT.

Up until now, it was understood that the waiver had to be formalized in a public deed in order to comply with the requirement of Art. 20.2 of the VAT Act. However, the Court diverges from the current interpretation in its ruling by deeming that any type of written communication sent to the seller indicating the wish to subject the transaction to VAT will be sufficient.

For further information, please contact Javier Valls Aracil: jvalls@mmmm.es