Investment approach
IVA on renovation: why a company cannot always recover 21%
A company pays 21% IVA on renovation under the standard regime, but input tax is often irrecoverable when the refurbished property is sold as resale housing.
The short answer
A company pays the standard 21% IVA on renovation; the reduced 10% rate is available only to an individual for their personal home. But paying 21% as an IVA taxpayer does not automatically entitle the company to recover it. The sale's own tax treatment is decisive.
How IVA deduction works in theory
A company registered as a sujeto pasivo de IVA and carrying on economic activity can deduct input IVA on materials and contractors' work from output IVA charged on sales. The logic is simple: pay tax on inputs, charge it on outputs, and settle or reclaim the difference. This leads many investors to assume that renovation IVA is merely a temporary 21% outlay recovered on sale.
Where that logic breaks down
A second supply of housing is exempt from IVA by default under article 20.Uno.22 of the IVA law (LIVA) and instead attracts ITP. If the output transaction is exempt, the company generally cannot deduct the input IVA paid on renovation. Waiving the exemption is possible in a narrow B2B case where the buyer is also an IVA taxpayer entitled to deduct tax in its activity. This is not the standard scenario for flipping a flat to a private buyer.
The counterintuitive result is that a company properly pays 21% on inputs and keeps IVA accounts, but its eventual sale goes through ITP. There is then no output IVA against which the input tax can be offset.
What this means for the project budget
The 21% renovation IVA a company expected to recover often becomes a permanent expense when the final buyer is an ordinary individual and the sale attracts ITP. Budget it as a real cost rather than a temporary VAT funding gap that will close on sale. This modelling error is more common than expected: 21% of renovation costs is a substantial sum capable of materially changing the project's return. See the full Barcelona project budget for the cost structure.
Ownership structure matters
Buying through a company rather than personally affects the entire transaction's tax structure, not just renovation IVA. The comparison is covered in buying as a company versus an individual. Choose ownership structure recognising that a tax saving at one stage may create an additional cost at another.
Conclusion
IVA recovery depends on the particular sale's tax treatment, rather than simply the company's IVA registration. Ask a tax adviser to establish whether the exemption can be waived in the proposed structure and whether input tax is recoverable at all.
Questions and answers
Can a company recover renovation IVA when selling the flat to a private buyer?
Generally not. Resale housing sold to an individual usually attracts ITP rather than IVA, removing the company's right to deduct input IVA.
Is there a lawful way to recover renovation IVA?
In theory, if the buyer is also an IVA taxpayer and the parties waive the article 20.Uno.22 exemption. This is a narrow B2B scenario rather than a typical flip.
Should the 21% IVA be included as an expense in project returns?
Yes, unless the transaction qualifies for the limited exemption-waiver scenario. Otherwise, the budget understates the actual tax cost.