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V0411-21 26 February 2021 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · rendimientos del capital inmobiliario

Compensation for lease termination classified as real estate income without irregularity reduction

A property owner sought clarification on whether a €50,000 compensation received for terminating a lease to restore a premises to its original state qualified for the 30% reduction applied to irregular income. The Directorate General of Taxes (DGT) ruled that while the compensation constitutes real estate capital income, the reduction for irregular income does not apply.

The question raised

Question raised: It is requested to know whether the reduction provided for in Article 23.3 of the Personal Income Tax Law is applicable. Secondly, a query is made regarding how to deduct the expenses for works carried out.

The DGT's ruling

The compensation received for the termination of the contract is classified as income from real estate capital. The expenses incurred to obtain said compensation and those necessary to return the premises to its initial state are deductible. The 30% reduction provided for in Article 23.3 of the Personal Income Tax Law (LIRPF) is not applicable because there is no generation period and the amount does not fall within the list of notoriously irregular income set forth in Article 15 of the Regulations.

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