Doctrine by topic · DGT Observatory

Interest on Third-Party Capital: DGT doctrinal evolution

How the DGT's position on this topic has evolved, and the rulings it rests on.

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How the DGT's position has evolved

Settled doctrine High confidence 15 rulings · 2016–2026

Current position

Interest on third-party capital invested in the acquisition or improvement of real estate is deductible from the gross income from real estate capital. It is essential to prove the allocation of the loan to the purchase or improvement through means of proof admitted under Law. The deduction is limited to the amount of the gross income obtained, allowing the excess to be offset in the following four years.

The DGT's position remains constant regarding the deductibility of interest, provided that the effective investment in the real estate is proven. Throughout the rulings, it has been specified that the substitution of loans or the use of the primary residence as collateral does not prevent the deduction. The doctrine emphasizes the need to prove the link between the capital and the acquisition or improvement of the asset.

Turning points

  1. V1278-18

    Establishes that deductibility is maintained if a new loan is used to repay the original loan linked to the acquisition.

  2. V1918-25

    Clarifies that the use of the primary residence as collateral for the loan does not prevent the deductibility of the interest.

Analysis based on 15 of 15 rulings with a stated position. Updated 26 September 2026.

Rulings on this topic

15
V1596-26 16 Jun 2026

Rental income from jointly owned property is capital gains

SG de Impuestos sobre la Renta de las Personas Físicas
rendimientos del capital inmobiliariocomunidad de bienesatribución de rentasgastos deduciblesintereses de capitales ajenos LIRPF — Ley 35/2006 del IRPF art. 8.3LIRPF — Ley 35/2006 del IRPF art. 21.1
Affects CompanyExpat · Non-residentIndividual
V0777-25 5 May 2025

Deduction of mortgage interest and in-kind remuneration in real estate income

SG de Impuestos sobre la Renta de las Personas Físicas
retribución en especierendimientos del capital inmobiliariogastos necesariosintereses de capitales ajenosvaloración de rentas en especie LIRPF — Ley 35/2006 del IRPF art. 17.1LIRPF — Ley 35/2006 del IRPF art. 23.1
Affects CompanyExpat · Non-residentIndividual
V2436-24 3 Dec 2024

Interest on loans for apartments leased for commercial use may be tax-deductible

SG de Impuestos sobre la Renta de las Personas Físicas
rendimientos de capital inmobiliariogastos deduciblesintereses de capitales ajenoscesión de derechosmedios de prueba LIRPF — Ley 35/2006 del IRPF art. 22LIRPF — Ley 35/2006 del IRPF art. 23.1
Affects CompanyExpat · Non-residentIndividual
V1049-21 21 Apr 2021

Repayment of mortgage principal is not deductible for Personal Income Tax

SG de Impuestos sobre la Renta de las Personas Físicas
rendimientos del capital inmobiliarioamortización del inmuebleintereses de capitales ajenosdevolución del principalgastos de financiación LIRPF — Ley 35/2006 del IRPF art. 23.1LIRPF — Ley 35/2006 del IRPF art. 27.2
Affects CompanyExpat · Non-residentIndividual
V0322-19 15 Feb 2019

Loan interest is only deductible during the period the property is rented

SG de Impuestos sobre la Renta de las Personas Físicas
rendimientos del capital inmobiliariogastos deduciblesintereses de capitales ajenosarrendamientorendimiento neto LIRPF — Ley 35/2006 del IRPF art. 22LIRPF — Ley 35/2006 del IRPF art. 23.1
Affects CompanyExpat · Non-residentIndividual

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