Property renovation works at 6% VAT now require municipal council authorisation

If a developer or builder wants to benefit for a reduced 6% VAT instead of the normal 23% they may now have to get additional authorisation from the local municipal council meaning a formal approval for an Urban Rehabilitation Operation for the area involved.

In other words, it is not enough that the contract is located in an urban rehabilitation area (ARU), according to binding information from the Tax Authority (AT), published this Tuesday on the Finance website, which supports a ruling by the Supreme Administrative Court that has standardised jurisprudence in this matter.

The official letter follows a request for clarification from a private social solidarity institution (IPSS) that asks for the application of the minimum rate of 6% in the construction of a new residential structure for the elderly (ERPI) because it already has an approved license and is located in an urban rehabilitation area (ARU).