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V1868-14 14 July 2014 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · estimación directa

Office renovation works: expense or asset depending on nature; employee insurance premiums are deductible

A sole trader inquires about the deductibility of office renovation works and life and accident insurance premiums for their employees. The DGT rules that the treatment of renovation works depends on whether they constitute repairs or improvements, and that employee insurance is deductible due to its correlation with the business activity.

The question raised

For the purposes of Personal Income Tax:

The DGT's ruling

Renovation works are deducted as current expenses if they are for repair or maintenance, but must be capitalized as fixed assets if they involve a renewal, expansion, or improvement of the asset. If the office is leased, investments are accounted for as fixed assets in operating leases. Life and accident insurance premiums mandatory for employees are deductible as they are correlated with the income from the activity.

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