The New VAT Doctrine in the Transfer of Real Estate without a Certificate of Occupancy

On September 15, 2025, the Directorate General of Taxes (hereinafter DGT), in its Binding Ruling V1621-25, analyzed the Value Added Tax (VAT) treatment of an increasingly common transaction in the real estate market: the acquisition of commercial premises for conversion into residential properties and their subsequent transfer.

The Ruling addresses various issues, but, for the purposes of this article, its relevance lies in the change of criteria adopted by the DGT with respect to all its previous rulings, with a direct impact on the tax rate applicable to the transfer of residential properties.

It is worth recalling that the transfer of buildings or parts thereof suitable for use as housing, when the transaction is subject to VAT and not exempt, is taxed at 10% (Article 91.One.1.7 of the VAT Law), compared to the general rate of 21% applicable to all other cases.

However, a contentious question arose: at what point can a property being transferred be classified as a dwelling and, consequently, subject to the 10% tax rate instead of the 21% rate?

Traditionally, for a property to be classified as a dwelling for tax purposes, the Tax Administration, following a strict formalistic criterion, required not only that the property be objectively suitable for use as a dwelling, but also that it possess a certificate of occupancy or a first occupancy license. This had been established, among others, in Binding Rulings V0284-10 and the more recent V2409-24.

For its part, the Central Economic-Administrative Court (hereinafter, TEAC), in repeated and therefore binding rulings for the Tax Administration, had concurred with the criteria of the Directorate General of Taxes (see, among others, its resolution of May 21, 2021), although it introduced a nuance. In particular, it admitted that a transferred property could also be considered a dwelling when, on the date of the transfer, the occupancy certificate had already been requested and was granted subsequently, provided that no modifications had been made to the property's condition since the time of the request.

Now, the Spanish Directorate General of Taxes (DGT) incorporates into its Ruling V1621-25 the doctrine previously established by the Supreme Court in its judgment 82/2025, of January 28, which substantially relaxes this approach: the occupancy certificate becomes a means of proof, but ceases to be a necessary and exclusive requirement.

The decisive factor in classifying a property as a dwelling for tax purposes will be its objective suitability to serve as accommodation for individuals, taking into account both its construction characteristics and its legal intended use. This suitability may be proven by any means of evidence admissible in law (Art. 106 LGT), without any formal requirement being applicable.

In conclusion, in the new Binding Ruling V1621-25, the Administration adopts the recent Supreme Court jurisprudence that obliges it to accept a much more flexible and less formalistic criterion than the one applied until now. This will facilitate the application of the reduced rate of 10% to the transfer of properties intended for housing, regardless of whether or not the corresponding occupancy certificate has been obtained at the time of the transfer.