VAT exemption on the delivery of rural land and transfer of rights of single payment. Binding Tax Ruling


The facts refer to the transmission or transfer of rights of single payment and its treatment for VAT purposes, since such transmission or lease occurs together with a number of eligible hectares, which leads to the difficulty of assessing whether are two separate supplies or one is accessory from another.

In this sense, we must remember the VAT exemptions provided in the article 20.One.20º and 20.One.23º of the Spanish VAT Act 37/1992. Thus, article 20.One.20º provides, in general terms, the exemption from VAT for deliveries of rustic land and other areas that do not have the condition of building land, while article 20.One.23º states the exemption of leases that have the consideration of services and the constitution and transfer of real rights of enjoyment relating to rustic land.

Therefore, in view of determining the proper treatment for the purposes of VAT of the transmission or transfer of the rights of single payment is essential to know if with this transaction is transmitted only a right of lease of the land or there is a transfer of a whole business, as stated in the reply of the consultation made by the General Tax Directorate (DGT), since the transmission or lease of land would be (in principle) exempt from VAT, while the transfer or sale of a whole business is a transaction subject to VAT.

In this regard, the European Commission has recently stated that: “when the rights of single payment is transferred together with land, on the basis of a leasing contract, the VAT treatment of the rights of single payment will normally follow the VAT treatment applicable to the transfer of the land, because the lease of the land and rights go together. If the lease of the land is exempt from VAT, the transfer of the rights of single payment will be exempt too.”

This criterion is sustained by the already known Case-Law of the Court of Justice of the European Union in respect of the ancillary transactions and its treatment for the purposes of VAT, holding the Court the criterion that an accessory provision is nothing more than a means to enjoy in the best conditions the main provider’s service, in which case an accessory provision does not constitute itself an end and must follow the same treatment of the main provision which is the real transaction.

In addition, insists the DGT, the fact that billing just one price has no decisive importance, since if two different benefits are acquired, it would be necessary to allocate the part of the price to one and to another according to what can be understood from the relevant facts, applying to each one the correct VAT treatment. In short, is of vital importance to know if in the transaction performed each provision is independent of the other or one is an accessory provision of the principal, thus being only a means to enjoy with better conditions the latter.

In this case, the rights of single payment that are transmitted do not guarantee itself a right to receive money, but requires that the holder has a number of eligible hectares of land, must perform the work needed to maintain the land in good condition and that the non-use of the right during three years means the loss of it. All this leads to the conclusion that the transfer of rights of single payment is not an end itself when given together with the transfer of a land, so must follow the same treatment as the main transaction, which is the transfer of land, VAT exempt if the conditions are met for this purpose.

Attached is a copy in Spanish of the binding tax ruling number V2445/2015.

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