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V3079-16 4 July 2016 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · estimación directa

Renovations to premises may be treated as current expenses or as an increase in fixed assets depending on their accounting nature

A query was raised regarding whether renovation costs for a professional premises' facade should be recorded as an expense for the period or through depreciation. The DGT ruled that the treatment depends on whether the works are considered repairs and maintenance or if they constitute a renovation, extension, or improvement.

The question raised

Allocation of premises renovation expenses as current expenses or via depreciation.

The DGT's ruling

The tax treatment of works shall follow the commercial regulations of the General Accounting Plan. If the works are for repair or maintenance, they shall be recognized as current expenses in the fiscal year. If they constitute a renovation, expansion, or improvement that increases capacity, productivity, or useful life, they shall be incorporated into the book value of the property as an increase in the value of fixed assets for depreciation purposes.

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