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V0309-16 26 January 2016 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · ganancias y pérdidas patrimoniales

Insurance compensation and building demolition trigger capital gains and losses

A co-owner has requested clarification regarding the taxation of insurance compensation following theft and fire, as well as the costs associated with the demolition of a building. The Directorate General for Taxes (DGT) states that the compensation results in a capital gain or loss, and that the demolition constitutes a capital loss.

The question raised

Impact of the above on Personal Income Tax (IRPF) taxation.

The DGT's ruling

The insurance indemnity is computed as a capital gain or loss based on the difference between the amount received and the proportional part of the acquisition value of the damaged asset. The demolition of the building, by causing its disappearance, constitutes a capital loss for the residual acquisition value of the real estate. The demolition expenses are integrated into the acquisition value of the land for future transfers.

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