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V0229-15 21 January 2015 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IVA · deducción de cuotas

VAT deduction for pre-occupation renovation works

A commercial property owner asked whether she could deduct VAT and expenses for renovation works carried out before leasing the property. The DGT states that VAT is deductible if the intention to start an economic activity is proven, and examines deductibility in personal income tax based on the nature of the works.

The question raised

1.) Deduction of VAT paid on the renovation works of the premises.

The DGT's ruling

To deduct VAT on acquisitions made prior to the commencement of activity, the intention to allocate them to said activity must be proven through objective elements. For Personal Income Tax (IRPF), if the works are for repair or maintenance, they are deductible as current expenses if they are linked to the generation of income. If the works constitute an improvement, an increase in capacity, or an extension of useful life, they must be incorporated into the book value of the property and deducted via depreciation.

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