The Internal Revenue Service in Official Letter No. 1383 of May said that the construction of housing in own terrain is not subject to VAT.

No. 20,780 Law on tax reform effectively introduced some changes in the application of VAT on the sale of properties, which have no bearing on the present case, since it is not the regular sale of tangible property nor the other special taxed facts related to it, but is building a house on their own land, financed with a loan of self-construction (a situation that law No. 20,780 has not changed).

However, it is noted that, in accordance with applicable legislation on the subject, you may be affected by the special taxed fact the letter e) of Article 8 of the Law on Sales and Services Tax, as long as general contracts concluded construction or installation of specialties to build the house, in which case the contractor or subcontractor, as appropriate, should recharge the tax due as all the facts taxed with that tax. You should also bear the VAT on the purchase of materials, in case you decide to raise housing directly through self-construction.