The European Commission has formally requested Spain to bring its administrative practice regarding the application of certain VAT rules for determining the taxable amount in case of barter transactions in the construction industry in line with the provisions of the VAT directive.

According to the Commission press release:

“In Spain, when a future building or part thereof is sold and paid for prior to its final construction, VAT is charged at the time the payment is made, and the taxable amount is the amount actually paid. No additional VAT is levied at a later stage when, upon final construction, the building is delivered to the purchaser. This is in conformity with the VAT Directive.

However, in the same situation, if the advance payment of the planned building is made in kind (for example, if the purchaser of the planned building pays by supplying a piece of real estate) the taxable amount for the purposes of VAT is different. In that case:

• VAT is levied when the advance payment is made on the basis of the market value foreseen for the building once it has been constructed;
• if, once construction is over, the market value of the building is higher than foreseen, a correction of the taxable amount initially calculated must be made and the purchaser of the building is requested to pay VAT on the difference.”