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V0169-17 24 January 2017 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · comunidades de montes vecinales

Portion of timber sales used to repay a refundable advance is a liability cancellation, not an expense

A community of communal woods has queried whether the portion of timber sales used to repay an advance from the Administration is deductible as an expense. The Directorate General for Taxes (DGT) has ruled that this does not constitute an expense, but rather the cancellation of a financial liability.

The question raised

It is asked whether that 30% is deductible as an expense and, if so, what supporting document the consulting entity would require to justify it, and on which date the expense would be recognized.

The DGT's ruling

The amount from the sale of wood constitutes income for the community. The portion reserved for the repayment of the refundable advance is not an expense, but rather corresponds to the cancellation of a financial liability that must be included in the creditors item of the liabilities on the balance sheet.

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