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V2749-14 13 October 2014 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · deducción por reinversión

Reinvestment tax relief may apply if proceeds from property sales are used for refurbishment

A real estate leasing company inquired whether it could apply the tax relief for the reinvestment of extraordinary profits by using the proceeds from the sale of a building to refurbish its main building. The Directorate General for Taxes (DGT) ruled that this is possible provided the requirements of Article 42 of the Corporate Income Tax Law (TRLIS) are met.

The question raised

Whether the profit obtained from the sale of the real estate can benefit from the provisions of Article 42 of the consolidated text of the Corporate Income Tax Law, approved by Royal Legislative Decree 4/2004, of March 5, if the total amount obtained in the said sale is to be reinvested in the renovation of the company's main active building.

The DGT's ruling

Reinvestment shall be understood as having taken place if the asset subject to it is used for an economic activity and becomes operational within the reinvestment period. In this case, the real estate must be used for the leasing activity and must have become operational within the period of three years from the transfer. All other requirements of Article 42 of the TRLIS must be met.

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