The Supreme Court, Administrative Disputes Division, through Ruling 82/2025, of January 28, reconciles the taxpayer’s position and removes administrative obstacles when applying the reduced rate of 10% as opposed to the general rate of 21% for the purchase of homes intended as primary residences without the need to obtain a first occupancy license and certificate of occupancy, since, according to the Supreme Court, these only serve to prove that the home meets certain pre-established administrative requirements for it to be used as a human residence.
In this recent ruling, the Supreme Court points out that what is decisive is not so much that the dwellings have a first occupation license as that they are finished and that this is their legal purpose; “suitable for use as dwellings” is exactly the expression to which Law 37/1992, on Value Added Tax, conditions in its article 91. One. 1.7º, the application of the reduced rate to the delivery of buildings or parts thereof by the parties involved in the transaction.
The ruling establishes the following three requirements to benefit from the reduced rate of 10%:
“1st) That it is a question of finished housing, since the delivery of the building, as long as it is not finished, follows the regime of the land on which it is built.
2) The rate applies to all transactions that, in accordance with Article 8 LIVA, are considered to be the delivery of housing, and not to transactions relating to housing that are considered to be the provision of services.
3) According to the usual notion of the term, it is necessary that it be suitable for use “as a room or dwelling for a natural person or family, constituting their home or the seat of their domestic dwelling”.
This last requirement is closely linked to the possible legal destination of the acquired property. Therefore, beware of the exponential growth that has been taking place in recent years within the real estate sector in the acquisition of homes for tourist use, since, as the Supreme Court indicates, it excludes the application of reduced VAT on the purchase of homes intended for tourist apartments, since these cannot be classified as housing because their destination, in no case, can be the habitual residence of a family or natural person.
Therefore, taking into account the regulatory changes to the VAT Law, and the continued growth of the real estate sector in our country, our office advises you to seek advice prior to the acquisition of any real estate due to the numerous tax implications involved in such acquisitions.
If you need further information, our firm will be happy to provide you with the best advice.
Leticia Cayuela Mayor