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V3368-14 23 December 2014 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · ganancia patrimonial

Demolishing a building without compensation results in a capital loss for Personal Income Tax purposes

A property owner has enquired about the tax implications following the demolition of a building due to structural defects. The Directorate General for Taxes (DGT) has ruled that the disappearance of the property constitutes a change in assets resulting in a loss, and that demolition expenses will increase the acquisition value of the land.

The question raised

Taxation.

The DGT's ruling

The demolition of the building constitutes an alteration in the composition of the assets that results in a capital gain or loss. If there is no compensation, a capital loss is generated for the acquisition value (excluding the land), which is integrated into the general taxable base. Demolition expenses are considered an increase in the acquisition value of the land for future transfers.

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