Requirements for free depreciation: the concept of a new asset

The application of free depreciation constitutes a relevant tax incentive for companies and self-employed individuals seeking to optimize their tax burden after making investments. However, the correct classification of acquired assets is decisive to avoid contingencies with the Tax Administration.

What the DGT has ruled

The Directorate General of Taxes (DGT) has addressed the question of whether a premises can be considered a new asset for the purposes of applying the free depreciation provided for in Article 102 of the Corporate Tax Law (Ley del Impuesto sobre Sociedades). The criteria establish that new assets are understood to be those that are used or put into operating condition for the first time.

In this sense, for an asset to be eligible for this benefit, it must meet the requirement of being new, which implies that it must enter operation for the first time at the acquirer's premises. The DGT points out that determining whether a property or asset meets this requirement is a matter of fact that must be proven, as the Administration cannot determine such a condition based solely on generic data without verifying its previous state of use.

What it means for you

This criterion has a direct impact on both commercial companies and self-employed individuals or sole traders taxed under the direct estimation method. If your activity involves the acquisition of assets to increase your workforce, you must take special care with the traceability of the acquired asset.

The acquisition of a good is not enough; it is necessary to prove that said good has not been previously used and that its commissioning is unprecedented in your business operations. The lack of evidence regarding the novelty of the asset could invalidate the application of free depreciation during an inspection.

What you should do

When acquiring assets intended for free depreciation, it is fundamental to document the novelty of the good. It is recommended to:

• Keep all documentation proving that the asset enters operation for the first time at your premises.
• Verify the asset's usage history to ensure it meets the definition of a new asset.
• Evaluate each particular case with a specialist to ensure that the burden of proof is sufficient in the event of a possible action by the Administration.