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V2249-16 24 May 2016 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · inmovilizado material

Improvements to leased premises are amortised over the contract term if shorter than their economic life

A company enquired whether it was correct to use straight-line amortisation for works and renovations in a commercial premises based on the duration of its franchise agreement. The DGT ruled that if investments are not separable from the asset, they must be recognised as tangible fixed assets and amortised over their useful life, which shall be the contract term if it is shorter than the asset's economic life.

The question raised

Whether the method of depreciation applied to date for investments in works and renovations of the commercial premises is correct.

The DGT's ruling

Investments in works that are not separable from the leased asset must be accounted for as tangible fixed assets. Their depreciation must be carried out based on their useful life, which shall be the duration of the lease or transfer agreement (including probable renewals) provided that this is shorter than the economic life of the asset. This accounting expense is tax-deductible pursuant to Article 12.1.e) of the LIS.

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