Requirement of asset composition change to compute capital losses in Personal Income Tax

The determination of capital gains and losses is a critical aspect in the settlement of Personal Income Tax (IRPF). Recently, the Dirección General de Tributos (DGT) has specified the timing and the necessary condition for a decrease in the value of an asset to be considered fiscally as a capital loss.

What the DGT has ruled

The inquiry addresses the possibility of computing a capital loss when the value of certain assets decreases, but they remain in the taxpayer's possession. The DGT has ruled that, pursuant to Article 33.1 of Law 35/2006, capital gains and losses are variations in the value of assets that manifest upon any alteration in their composition.

Consequently, the criterion establishes that it is not possible to compute a capital loss as long as a real alteration in the composition of the taxpayer's assets does not occur. This implies that the mere fluctuation in the value of an asset, without a transfer or change in ownership or composition of the assets, does not generate a compensable tax effect.

What it means for you

This criterion has a direct impact on individuals who hold assets, such as shares or holdings, that are not listed or have not been subject to a sale operation. If the market value of an asset falls significantly, but the taxpayer maintains ownership of it, they cannot declare that loss to reduce their IRPF taxable base.

The regulations require that the variation in value be linked to an event that modifies the structure of the taxpayer's assets. Therefore, accounting or market devaluation, by itself, does not constitute the necessary taxable event for the recognition of the loss.

What you should do

In the presence of assets with market values lower than the acquisition price, it is necessary to analyze the nature of the holding and the possibility of carrying out operations that involve an alteration in the asset composition. Each situation must be assessed individually to determine whether the requirements of Law 35/2006 and the General Tax Law are met.