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V2118-24 1 October 2024 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · inmovilizado material

Fixed assets for improvements on leased premises must be derecognised upon termination of the lease agreement

A hospitality company enquired whether it could continue to depreciate the costs of refurbishing a leased premises until the end of the 20-year contract, following the early termination of the lease in 2019. The DGT ruled that, upon termination of the contract, the asset must be derecognised, with any resulting loss or gain recognised in the corresponding financial year.

The question raised

Whether they can continue to depreciate the works until the 20-year lease term is completed (in 2037) in order to avoid incurring losses in 2019, or if, conversely, they must derecognize it in its entirety in 2019 with the resulting extraordinary loss and, therefore, the compensation of negative tax bases in the following years.

The DGT's ruling

Upon the termination of the lease agreement, the tangible fixed assets consisting of the works carried out must be derecognized. The difference between the book value and the amount obtained from the derecognition shall determine the profit or loss to be recognized in the profit and loss account for the fiscal year in which it occurs. According to the direct estimation method, said loss shall be included in the taxable base of the tax period in which it accrues.

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