Situation
The transaction involved the purchase and sale of a secondary commercial property. The owners of the property were private individuals (non-business owners), while the buyer was a company engaged in real estate investment and trading.
Legal Issue
As a general rule, such transactions are subject to the Property Transfer Tax (Impuesto sobre Transmisiones Patrimoniales — ITP). When ITP applies, VAT does not apply, as the two taxes are mutually exclusive.
Solution
Since both the buyer and the sellers qualified as entrepreneurs for tax purposes, it became possible to apply a waiver of VAT exemption. Additionally, the reverse charge mechanism (inversión del sujeto pasivo) was applied. In practice, the buyer declared both output VAT and deductible input VAT in its quarterly VAT return, resulting in a neutral VAT effect (0 € tax impact).
Result
The only applicable tax was the Stamp Duty / Tax on Documented Legal Acts (Actos Jurídicos Documentados — AJD) at 3.5% of the purchase price. Tax savings exceeding €100,000 for the client.
