In its resolution dated September 20, 2022, the Spanish Central Administrative Tribunal (TEAC) sought to limit the cases in which the third provision of Article 84.1.2(e) of Law 37/1992 (VAT Law) applies, stating that an essential requirement for any of the cases provided in that provision is the existence of a guarantee execution.
However, a subsequent resolution of the TEAC, dated October 20, 2022 (RG 2077/2020), seems to qualify and correct the previous point mentioned regarding the transfer of certain properties, where it recognizes that the guarantee execution does apply.
Specifically, the TEAC analyzes, among other issues, the possible application of the reverse charge mechanism provided in Article 84.1.2(e), third provision, of Law 37/1992 in the transfer of a property affected by registered charges derived from the corresponding urban development project.
Therefore, according to this later resolution, the TEAC states that, in the case of the transfer of properties subject to the payment of urban charges, as described in previous responses, the reverse charge mechanism provided in Article 84.1.2(e), third provision, of Law 37/1992 would be applicable.
This implies that the TEAC confirms that, in the case of transferring a property with existing urban charges, the reverse charge mechanism subject to controversy does apply.
Consequently, the tax authority concludes that the reverse charge mechanism provided in Article 84.1.2(e), third provision, of Law 37/1992 will continue to be applicable in the situation described, where the property is transferred with an existing mortgage guarantee, and the acquirer assumes that pending guarantee, as seems to be the case in the consulted situation.
Therefore, the landlords of the properties will be liable for the subsequent rental of the houses, which are subject to VAT and not exempt according to the previous sections of this response, even if they are non-established individuals in the territory of application of the tax.
Source: audiconsultores-etlglobal.com
