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V2305-18 7 August 2018 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · rendimientos del capital inmobiliario

Improvements and extensions may be integrated into the acquisition cost for the purpose of calculating depreciation

The taxpayer asks whether investments and improvements made to a property received via donation can be added to the acquisition cost to deduct depreciation on rental income. The DGT responds that, depending on the nature of the works, these may be considered improvements or extensions that increase the acquisition cost.

The question raised

Question posed: Whether, for the purpose of calculating depreciation as a deductible expense, investments and improvements carried out can be considered part of the acquisition cost of the property, as well as, where applicable, the means of accreditation for said investments and improvements.

The DGT's ruling

To determine the net yield from real estate capital, the deductible depreciation may not exceed 3% of the higher of the cadastral value (excluding land) or the satisfied acquisition cost. In properties acquired via donation, the acquisition cost includes acquisition expenses and the cost of investments and improvements. Works that increase capacity, habitability, or useful life are considered improvements or extensions and must be included in the cost, whereas maintenance works are considered conservation expenses. The taxpayer must justify these works through invoices or means of proof admitted under Law.

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