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V2072-14 30 July 2014 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · deducción por inversión de beneficios

Deduction for profit reinvestment and freedom of depreciation cannot be applied when purchasing non-new real estate

A company has requested clarification on whether purchasing a six-year-old property can be classified as an investment in new assets to qualify for the deduction for profit reinvestment or freedom of depreciation. The Directorate General for Tax (DGT) has ruled that this is not possible as the asset is not considered new.

The question raised

Whether the real estate asset, being six years old, is not considered used according to the provisions of Article 2.4 of the Corporate Tax Regulations, approved by Royal Decree 1777/2004, of July 30, and, therefore, is eligible to benefit from the tax incentives established in Article 37 of the consolidated text of the Corporate Tax Law, approved by Royal Legislative Decree 4/2004, of March 5, that is, the deduction for reinvestment of profits or, failing that, the freedom of depreciation with job creation.

The DGT's ruling

To access the deduction for reinvestment of profits or the freedom of depreciation, the assets must be new. Article 2.4 of the RIS establishes that buildings with an age of less than ten years are not considered used assets, but this only applies for the purposes of calculating depreciation. Given that the property is six years old, it is not considered a new asset and the entity cannot apply the benefits of Article 37 or Article 109 of the TRLIS.

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