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V1902-24 21 August 2024 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · reserva de dominio

Income from the sale of premises subject to a retention of title clause is recognised upon full payment

A company enquired whether the profit from the sale of premises should be recognised upon the execution of the deed or when the payment is completed. The DGT ruled that, if a retention of title clause exists and possession is not transferred, the income accrues when the full price is paid.

The question raised

Confirmation of whether the profit obtained by the consulting entity A from the sale of the premises should be attributed to the tax period of the Corporate Income Tax in which the purchase and sale deed is formalized (2022) or, conversely, to the tax period in which the purchasing party (entity Y) pays the agreed price in full and, therefore, the transfer of ownership of the premises takes place.

The DGT's ruling

If a retention of title is agreed upon and possession of the asset is not delivered, the risks and benefits inherent to ownership are not transferred upon the signing of the deed. In this case, the income does not accrue upon formalization, but rather when the full payment of the agreed price is made. Amounts received prior to full payment must be considered a liability (debt) on the balance sheet.

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