For the calculation of the net return on real estate capital , all the necessary expenses to obtain it, as well as the amounts allocated to amortization , can be deducted from the full returns of the property and from the other assets transferred with it , provided that they correspond to its effective depreciation.
In the case of property leases subject to and not exempt from Value Added Tax ( VAT ) or the General Indirect Canary Tax ( IGIC ), deductibles will be computed excluding VAT or, where appropriate , IGIC .
Necessary expenses to obtain the rent : interest and other financing expenses and conservation and repair expenses [ Arts . 23.1 a) 10 IRPF Law and 13 a) Reglament]
The following are considered included among the necessary expenses to obtain the yields , among others :
- Deductible expenses
- Interest and other financing expenses
Interest and other financing expenses of foreign capital invested in the acquisition or improvement of the property, right or faculty for use or enjoyment , as well as, where appropriate , of the assigned property, are deductible.
The interests that , due to the application of mortgage-floor clauses , would have been paid by the taxpayer and with respect to those that , before the end of the term for filing the self – assessment of personal income tax by said exercise , the agreement to return the amount is reached with the financial institution or as a result of a court ruling or an arbitration award, they cannot be deducted as an expense.
- Conservation and repair
Expenses of conservation and repair of the property that produce income are deductible . For these purposes, they have this consideration :
- a) Those carried out regularly with the purpose of maintaining the normal use of material good, such as painting , plastering or repair of facilities.
- b) The replacement of elements, such as heating installations , elevator , security doors or others, for the expansion or improvement of the assets are not deductible for this concept , as they constitute a higher acquisition value whose recovery is made through the corresponding depreciation.
**Maximum deduction limit for the two previous necessary expense items
- The maximum total amount to be deducted for interest and other financing expenses and for conservation and repair expenses may not exceed , for each asset or right, the amount of the full income obtained.
The excess may be deducted in the following four years, without exceeding, together with the expenses for these same concepts corresponding to each of these years , the amount of the full returns obtained in each of these years. the same , for each good or right.
- The amount pending deduction from the exercises will be applied with priority to the amounts corresponding to the exercise itself for these same concepts.
In the event that there are several lease contracts in the year on the same property, the maximum limit of the amount to be deducted for interest and conservation and repair expenses must be computed taking into consideration the amounts paid in the year and the full income obtained in it, for some of the lease contracts, the amount deducted for interest and maintenance and repair expenses could exceed the income obtained.
- Taxes and non-state surcharges
taxes and surcharges are deductible , as well as state fees and surcharges , such as the IBI, fees for cleaning, garbage collection, lighting, etc., provided that:
a ) Affect on the computed yields or on the goods or rights that produce them.
- b) They do not have a punitive nature.
- Debts of difficult collection
Debts with difficult collection are deductible, provided that this circumstance is sufficiently justified. It is understood sufficiently justified under the following circumstances:
- a) When the debtor is in bankruptcy.
b ) When between the time of the first collection procedure carried out by the taxpayer and the end of the tax period, more than six months had elapsed , and there had been no credit renewal.
When a debt is collected after its deduction , it will be computed as income in the year in which said collection occurs.
- Amounts allocated to the amortization of the property.
The amounts earmarked for the amortization of the property and the other assets assigned with it are considered deductible expenses, provided that they correspond to their effective depreciation.
Amortizations are considered to meet the effectiveness requirement when they do not exceed the percentages indicated below:
- Property:
The result of applying the percentage of 3% on the greater of the following values.
- a) Acquisition cost paid, including expenses and taxes inherent to the acquisition (notary, registry, non-deductible VAT, Tax on Property Transfers and Documented Legal Acts , agency expenses , ) not included in the computation of the value of the land. In real estate acquisitions by inheritance or donation , only the part of the expenses and taxes inherent to the acquisition that corresponding to the construction, as well as all the investments and improvements made.
- b) Cadastral value, excluding the value of the
If the value of the land is known, it will be calculated by prorating the cost of the acquisition satisfied between the cadastral values of the land and of the construction of each year reflected in the corresponding receipt of the Tax on Real Estate ( IB I ).
- Assets of a movable nature assigned jointly with the property
They will be repayable provided that they can be used for a period of time greater than one year.
It will be understood that the deductible annual amortization for each of the transferred assets meets the effectiveness requirement, when its amount does not exceed the result of applying the respective acquisition costs to their respective acquisition costs , satisfying the amortization coefficients . that corresponds to it in accordance with the simplified amortization table approved by Order of March 27, 1998. Within this table , among others , the following maximum efficient coefficient of Amortization: Installations, furniture and fixtures: 10%.
- Rights of use or enjoyment on the property
They will be redeemable provided that their acquisition has entailed a cost for the taxpayer. In these cases it is necessary to distinguish:
- a) If the right or faculty has a fixed term , the deductible annual amortization will be the one resulting from dividing the cost of acquisition paid by the number of years of duration of the same .
- b) If the right or faculty were for life , the computable amortization will be the result of applying the efficient coefficient of 3 % on the paid acquisition
In both cases , the amount of the repayments may not exceed the amount of the full returns derived from each right. Important: in the event that the property has not been leased throughout the year , the deductible amortization , interest and other financing expenses , the expenses in premiums of insurance, etc., will be those that correspond to the number of days of the year in which the property has been leased .
- Non-deductible expenses
They will not be deductible as an expense, among others:
– Payments made due to accidents occurring in real estate that give rise to decreases in the value of the taxpayer’s assets.
– The amount of the improvements made to real estate, without prejudice to the recovery of its cost by way of depreciation .