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V1928-18 29 June 2018 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · existencias

Expenses for properties pending sale or lease are deductible for Corporate Tax under specific conditions

A real estate developer has enquired whether expenses (community fees, IBI, depreciation) for properties awaiting sale or lease with an option to buy are deductible. The DGT has ruled that they are deductible, provided that the requirements for accounting registration, accrual, and documentary evidence are met.

The question raised

Question raised 1. Regarding real estate properties pending sale or lease with an option to purchase, a series of necessary expenses are incurred throughout the fiscal year, such as community fees, Real Estate Tax, and accounting depreciation. The question is whether these can be considered deductible expenses for Corporate Income Tax purposes, on the grounds that they are being allocated to the tax period in which they accrue, respecting the principle of correlation between income and expenses. In the event that they are not tax-deductible, if a lease with an option to purchase is entered into in a subsequent fiscal year, how should the tax allocation of the accounting expense that was not previously deductible be handled.

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