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V2572-15 4 September 2015 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · entidad patrimonial

Maintenance and financing costs of property are deductible if legal requirements are met

A company owning only property asks whether its expenses, VAT, and consideration for partners' use of homes are deductible. The DGT states that expenses under the Income Tax Law depend on legal requirements and that the grant of property to partners constitutes income in kind.

The question raised

1. Deductibility of expenses for the maintenance of real estate and other expenses (community fees, property tax, electricity, water, gas, etc.); deductibility of expenses for external financing (interest) to acquire real estate and of the expenses associated with the acquisition (notary, registry, etc.).

The DGT's ruling

In Corporate Income Tax, expenses are deductible if they meet the requirements of accrual, temporal imputation, accounting entry, and substantiation, in addition to being correlated with the generation of income. The free transfer of real estate to partners constitutes income in kind, which qualifies as income from movable capital. In VAT, if the company does not carry out economic activity and is limited to the mere holding of assets, it does not have the status of a taxable person nor the right to deduction.

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