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V2971-20 2 October 2020 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · valor de adquisición

Renovations may increase acquisition value if deemed improvements or extensions to the property

A query was raised regarding whether renovation costs for a rental property can be added to the acquisition value for future sale purposes. The DGT ruled that this depends on whether the works constitute improvements or extensions, or are merely repairs and maintenance.

The question raised

Tax treatment of incurred renovation expenses, and their consideration as an increase in the acquisition value of the house in the event of a future sale.

The DGT's ruling

The acquisition value includes the cost of investments and improvements, but not repair and maintenance expenses. Improvements or expansions are those that increase the capacity, habitability, or useful life of the property. Repairs are those intended to maintain the useful life and capacity of use. The classification will depend on the nature of the works and the justification thereof.

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