What is the tax rate for work on dwellings?

Nicolas Emery taxes dwellings

Nicolás Emery summarises the taxes on building work carried out on dwellings as set by the Tax Agency.

New Construction:

Depending on the type of work carried out, the applicable taxes will be different. In the case of construction or renovation work on housing, the reduced VAT rate (10%) will be applied when:

  • In the case of new construction or refurbishment works that are mainly intended for dwellings, premises, garages or annexes, as a result of contracts entered into directly between the developer and the contractor. *Buildings 50% of which are intended for residential use are considered to be mainly for residential use.
  • Sales with installation of kitchen and bathroom cabinets and built-in wardrobes for dwellings, as a result of contracts directly formalised between the promoter of the construction or refurbishment and the contractor.
  • Executions of work directly formalised with Communities of Owners for the construction of garages in buildings intended mainly for dwellings, provided that they are carried out on common land and the number of spaces to be allocated to each owner does not exceed two.
  • The extension of a dwelling is considered as construction, and is taxed at 10%, provided that it increases the living área

*Exceptions:

  • Interior alterations to a dwelling are not considered as construction.
  • The delivery without installation of doors, windows, wardrobes, kitchen furniture, etc., for the execution of works in buildings will in any case be taxed at the general rate of 21%, given that it is not considered to be the execution of works.

Refurbishment work:

In order to determine whether the work carried out is a refurbishment and is taxed at the reduced rate of 10%, two requirements must be met:

  • That more than 50% of the total cost of the refurbishment project corresponds to works of consolidation or treatment of structural elements, façades or roofs or to works analogous or related to refurbishment works.

*For these purposes, it will be necessary to have sufficient evidence to prove the true nature of the planned works, such as, among others, the opinions of professionals specifically authorised to do so or the approval and, if applicable, qualification of the project by professional associations.

If the first requirement is met, the total amount of the total works must exceed 25% of the purchase price of the building (if it was acquired in the two years prior to the start of the renovation works), or of the market value of the building prior to its renovation, in both cases deducting the value of the land.

Works analogous to refurbishment Works:

It considered Those of structural adaptation:

  • Those that provide the building with constructive safety conditions, in such a way that its stability and mechanical resistance is guaranteed.
  • Those of reinforcement or adaptation of the foundations, as well as those that affect or consist of the treatment of pillars or slabs.
  • Those for the extension of the built surface, above and below ground level.

Energy rehabilitation works.

Energy rehabilitation works will be considered to be 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 that uses renewable energy sources.

*In addition, in these cases, it is interesting to mention that the adjustments to improve energy efficiency will benefit the income tax return of individuals.

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