Property sales with waiver of the VAT exemption

When one business sells another a second-hand commercial premises, warehouse, office or plot of land, the transaction is exempt from VAT and subject to ITP, which is a final cost for the buyer. If the requirements are met, the seller can waive the exemption: the transaction becomes subject to VAT, which the buyer can deduct.

• On second and subsequent supplies of buildings.
• On the sale of rural or non-buildable land.

In addition, the seller must be a business or professional, and the buyer a business or professional acting in the course of their business with the right to deduct, in full or in part, the VAT on the purchase.

With the waiver, the seller does not charge VAT: the buyer reports it, pays it and, if entitled, deducts it in the same return. This is known as the reverse charge.

In exchange for avoiding ITP, in Catalonia the deed is subject to AJD at 3.5%. You can see how this tax is filed on our AJD page and, if the transaction ends up subject to ITP, on our ITP page.

Not always. The waiver avoids ITP, but the deed pays AJD at 3.5% and, if the buyer cannot deduct all the VAT, part of it becomes a cost. For the seller, on the other hand, the waiver can avoid having to adjust the VAT deducted when buying or refurbishing the property, if ten years have not yet passed. That is why, before signing, we run the numbers for both options for both parties.

The waiver must be notified to the buyer before or at the time the property is handed over; it is usually done in the deed. It cannot be waived after signing, so it should be assessed before signing the deposit agreement. AJD is then filed within one month of the deed.

When buying a home, the waiver is only possible if the seller is a business for VAT purposes, for example a developer or a property holding company, and the buyer is entitled to deduct the VAT on that purchase. If the buyer is going to let it as a home, which is an exempt activity, they will normally not be able to deduct and the waiver is not possible.

• Assessment of whether the transaction allows the waiver and whether it suits both parties.
• Notice of the waiver and the buyer's declaration of their right to deduct.
• Review of the tax clauses in the deposit agreement and the deed.
• Filing of the AJD on the deed.
• Instructions to each party's accountant for reporting the transaction for VAT.

• The draft deposit agreement or deed.
• The tax details of both businesses.
• The use the buyer will make of the property.

• Not putting the seller's notice and the buyer's declaration in writing: the tax authority may consider that the transaction was exempt from VAT and demand ITP from the buyer, with interest.
• Raising the waiver after signing, when it is no longer possible.
• Waiving without running the numbers: if the buyer cannot deduct all the VAT, part of it becomes a cost.