Luis Prados Ramos


The conversion of business premises into housing is an increasingly frequent operation in the real estate field, and with an upward trend for several years.

The reasons for these operations, like everything in life, can be various, but in essence they materialize in the need to obtain a return or greater return on the properties.
In this context, the rise of Internet commerce and the consequent fall of traditional commerce have influenced.
Thus, premises that were previously dedicated to small businesses are very difficult to rent as such and, on the other hand, there are studies that say that converting a premises into a tourist home or apartment is one of the most profitable businesses that exist, taking into account the high prices of the House.
On the other hand, the municipalities, being aware of these needs, have tended to make the requirements to carry them out more flexible.
Shedding some light on this matter is what we are going to try to do, based on the legal-fiscal consultations that are usually made to us at the Notary Public.
We will try to answer any possible doubts about these operations, through the following points.


The first question that arises in this type of operation is the Taxation of the acquisition of the premises to be transformed. 

Starting from the fact that in most cases it will be second building transmissions, it will be necessary to differentiate if the person transmitting is a individual or if you have the status of entrepreneur or professional (taxable subject of VAT).

1.1. Transmission by individuals.

In the case of transmission by individuals, the operation accrues property transfer tax at the rate established by the autonomous community where the property is located.

In the case of the Autonomous Community of Madrid, it will be 6% of the purchase value, as long as it is higher than the reference value established by the administration.

In the event that the purchaser is a real estate company, it can be considered whether the reduced rate of 2% in the Community of Madrid, regulated in article 30 of Legislative Decree 1/2010, of October 21, of the Governing Council, which approves the Consolidated Text of the Legal Provisions of the Community of Madrid regarding taxes ceded by the State.

Well, the tax consultation CTE 08-21/T, has determined that, if at the time of acquisition the property is assigned a use other than housing, the reduced tax rate will not be applicable, unless it forms an annex to a home and are transmitted together.

The allocation of use will be determined by the information contained in the Real Estate Cadastre, as it is the administrative registry under the Ministry of Finance in which rural, urban and special characteristics real estate is described in the terms established in the consolidated text of the Real Estate Cadastre Law, approved by Royal Legislative Decree
1/2004, of March 5.

1.2.- Transmission by businessmen and professionals.

Transfers of second-hand premises by businessmen and professionals They are operations subject to and exempt from VAT and, as a consequence, subject to asset transfers., in the same terms as the transmission by individuals.

They are subject to VAT, since as indicated in article 4, section one of Law 37/1992, of December 28, on Value Added Tax (BOE of December 29), that deliveries of goods and Provision of services carried out in the spatial scope of the Tax by entrepreneurs or professionals for consideration, on a regular or occasional basis, in the development of their business or professional activity, even if they are carried out in favor of the partners, associates, members or participants of the entities that carry them out.

But at the same time, article 20. One.22 of the Tax Law establishes the exemption of "A) The second and subsequent deliveries of buildings, including the land on which they are located, when they take place after completion of their construction or rehabilitation.

1.3. Is it possible to waive the VAT exemption?

In the event that the purchaser was also a businessman or professional, it can be considered if it would be possible to waive the exemption of the VAT, under the terms provided in article 20. Two of the Tax Law, which states the following:

Two. The exemptions relating to numbers 20 and 22 of the previous section may be waived by the taxpayer, in the form and with the requirements that are determined by regulation, when the acquirer is a taxable person acting in the exercise of its activities business or professional and is attributed the right to carry out the  total or partial deduction of the Tax borne when making the acquisition or, when the foregoing is not fulfilled, based on their foreseeable destination, the acquired goods will be used, totally or partially, in the realization of operations, which give rise to the right to deductionón”.

If it were possible to waive the VAT exemption, with the consequence of the inversion of the taxpayer, the purchaser should pay the documented legal act tax at the rate established by the autonomous community where the property is located, which in the case of the Autonomous Community of Madrid will be 1.5% of the purchase value, as long as it is higher than the reference value established by the administration, as determined in article 30 of Legislative Decree 1/2010, of October 21, of the Council of Government, which approves the Consolidated Text of the Legal Provisions of the Community of Madrid regarding taxes ceded by the State.

There is a requirement to waive the VAT exemption that I want to focus on, which is that the goods purchased are to be used, totally or partially, in carrying out operations, which give rise to the right to deduction.

In my opinion, in order for the waiver of the VAT exemption to be applied correctly, and assuming, as we have said, that we will be in the case of second building transfers, it will be necessary for the purchaser to carry out some works that can be considered rehabilitation , in which case the transfer of the dwellings may be classified as the first transfer of construction.

If, on the contrary, the works carried out cannot be considered rehabilitation or the destination of the resulting homes is their lease, there would be no possibility of waiving the VAT exemption.


From a strictly legal point of viewrídico the transformations of premises into housing require the completion of a public deed and its subsequent registration in the Property Registry.

These deeds of change of use constitute what can be considered an abbreviated declaration of work, since some, but not all, of the requirements to which declarations of new works are currently subject will be necessary.

What will have to be accredited before a Notary is the concurrence of the requirements established by the urban regulations and such requirements are, in essence:

a.- the license from the City Council of the place where the property is located, when so provided by the applicable urban planning law, unless a responsible declaration is possible.
b.- The certification of a technician that certifies that the work has been carried out in accordance with the project for which the license was obtained.
c.- And finally, the first occupancy license, although in some autonomous communities, it can be replaced by the mere communication or responsible declaration.

Specifically, in the Community of Madrid, article 155 of Law 9/2001, of July 17, establishes, among others, as acts subject to responsible urban declaration: c) The first occupation and operation of new buildings and houses prefabricated, as well as
buildings and facilities in general.

With these requirements, the deed will make a new description of the transformed premises, saying that it is a home, with the different rooms and services it has, but without modifying its surface or the participation fee in the Community of Owners.

Is it possible to declare the change of use due to age?

Yes, and regarding this issue, it is worth noting the resolution of the General Directorate of Registries and Notaries of March 27, 2019, which declared that the change of use can be documented by accrediting the requirements established by urban regulations or by age (Art. 28 sections 1 and 4, respectively, of the TRLS) and that once the possibility of access to the registry of the change of use accredited through the means provided for in article 28.4 of the consolidated text of the Land Law has been admitted, it must be concluded that the descriptive cadastral certification and graphics together with the annex of the physical economic background of the property meet the requirements to be able to verify the change of use in the registry entry in accordance with the provisions of at. 28.4 TRLS.

Is the consent of the Community of Owners necessary?

In principle no, unless there was an express provision in the statutes of the community of owners. 
It is consolidated doctrine of the General Directorate of Registries and Notaries that the informative principles of the property right do not undergo alteration as a consequence of the due harmonization with the limitations derived from the horizontal property regime and imposed by the physical unit of the building, and that in application of such criterion it must be understood that the expansive vocation of the domain allows any use of the object on which it falls as long as it is in accordance with its nature and the general purposes of the domain and specific of the horizontal property regime.

However, the foregoing does not prevent the statutes of the horizontal property regime, as conformers of the legal regime to be applied to both the common elements and the private elements that make up its object, delimiting the content of the latter establishing restrictions on their possible uses (articles 5 and 7 of the Law on horizontal property).

In order for said limitations, such as the exclusive use of an apartment as premises and not as housing, to have a real scope and exclude other possible uses, it is necessary, on the one hand, that they be duly included in the statutes (Resolutions of December 12, 1986 and March 23,
1998) and by another that they are with due clarity and precision (Resolution of February 20, 1989).

Does the public deed in which the change of use of a property that goes from being local to housing is taxed by AJD?

Regarding this issue, in principle, all the requirements set forth in article 31.2 of the LITP will be met, so that the deed of change of use is taxed as a documented legal act at the rate established by the autonomous community where the property is located. farm, which in the case of the Community of Madrid is 0.75%.

The General Directorate of Taxes (DGT) considers that the change of use has a clear valuable content, since it implies a change in the cadastral value, which directly or indirectly influences the determination of the real value of the asset.

As an exception, as will happen when the change of use can be declared due to seniority, the DGT (Query V0075-17) declared that the deed will not have valuable content and therefore will not be taxed by AJD, if it previously appears in the Cadastre as a dwelling and said Deed does not imply any modification of the cadastral value of the property. 

What is the tax base?

Admitted, or assuming that the deeds of change of use, are taxed by AJD, the million dollar question is what is the tax base for which they must be taxed, given the diversity of administrative pronouncements. 
The two options would be that the tax base is the value of execution of the work or the total value of the property.
Well, the judgment of the TSJ of Andalusia of November 8, 2016, appeal 118/2015, following the criteria contained in Consultation V1465-15, of 05/11/2015, and as happens with new works, the The tax base will be the cost of the work at the time it was carried out, without applying any type of deflating coefficients or corrective indices for age.


Once the change of use has been carried out and documented, the transformed dwelling may be used for rent or sale.

In case of sale of the houses if they come from a rehabilitation work in the terms established by the VAT Law, the acquirer or buyer of the property will pay VAT to the seller at 10%, in addition to the AJD tax (0.75%)

If the transformation works are not considered rehabilitation works, the acquirer or buyer will pay the property transfer tax at the rate established by the autonomous community where the property is located, which in the case of the Autonomous Community of Madrid will be the 6% of the purchase value.

If, on the contrary, the destination of the home is for rent, it should be noted that the lease of homes used exclusively as such, with furniture, garages and annexes (leased jointly when so established in the lease), is an operation exempt from
VAT, so the lessor should not charge this tax.

There are exceptions to this rule that go beyond what is intended by this entry.

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