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V1861-22 3 August 2022 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · entidad sin ánimo de lucro

Income from the sale of a leased real estate property is not exempt from Corporate Income Tax for non-profit entities

A non-profit association inquires whether the sale of its headquarters, the ground floor of which is leased, may be tax-exempt if the proceeds are reinvested. The DGT responds that the part of the property that is leased is not used for its corporate purpose, therefore the income from its sale is not exempt.

The question raised

Question raised

The DGT's ruling

Non-profit entities that are not of public utility are partially exempt pursuant to Article 9.3 of the LIS. The exemption for reinvestment under Article 110.1 c) of the LIS requires that the transferred asset be used for the achievement of the entity's specific object or purpose. If a part of the property is used for leasing, it is not used for said purpose, therefore the income from its transfer will not be exempt, regardless of the destination of the funds. Only the part of the property used as headquarters could be exempt if the requirements of use and reinvestment are met.

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