Deductibility of VAT on property ownership in a civil society’s exploitation.

• The TEAC resolution in Spain addresses the deductibility of VAT paid by a civil society that exploits properties.
• The civil society is formed by two spouses who have contributed the usufruct of properties they own.
• VAT was not charged when the usufructs were established.
• The spouses retain the bare ownership of the properties, which are not used for any business activity.
• The civil society enjoys the usufruct of the properties and exploits them.
• However, the civil society deducts VAT related to the bare ownership, such as repairs, which is not allowed as the bare ownership is not used for business purposes.
• Other VAT expenses are not directly and exclusively related to the usufruct and its exploitation through leasing.
• VAT paid for the bare ownership is not deductible as the business activity is carried out with the usufruct, while the bare ownership is a patrimonial asset for the individuals and does not meet the requirement of being affected by the business activity.

Source: audiconsultores-etlglobal.com

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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