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V2878-14 28 October 2014 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · deterioro de valor

Impairment of land is deductible if book value exceeds recoverable amount

A company enquired whether the impairment of land recorded in its profit and loss account could be deducted for Corporate Tax purposes. The DGT ruled that such an expense is deductible in the tax year it is recognised, provided the criteria of the General Accounting Plan are met.

The question raised

Whether the consulting entity is entitled to deduct, in its Corporate Income Tax return for the fiscal year ended December 31, 2013, the impairment of the reference land, recognized as an expense in the profit and loss account for the fiscal year ended December 31, 2013.

The DGT's ruling

The impairment loss on land is tax deductible in the fiscal year in which it is recorded, provided that the net book value exceeds its recoverable amount (the higher of its fair value less costs to sell and its value in use). If the loss is irreversible and the asset is derecognized, it shall also be considered a deductible expense. The verification that these valuation requirements are met is the responsibility of the Tax Administration.

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