Amounts allocated to amortization

Regulations: Articles 23.1 b) Law IRPF and 13 h) and 14 Regulation

Amounts used for the amortization of the property and other assets transferred with it are considered deductible expenses, provided that they correspond to its effective depreciation.

• Real estate

  In the case of real estate, depreciation will be considered to meet the effectiveness requirement when, in each year, it does not exceed the result of applying the percentage of 3 percent on the highest of the following values.

  1. Acquisition cost paid , including expenses and taxes inherent to the acquisition (notary, registration, non-deductible VAT, Property Transfer Tax and Legal Acts Documented documents, agency expenses, etc.) without including in the calculation the value of the land, as well as the cost of investments and improvements made to the acquired assets.

     In the case of property acquisitions by inheritance or donation, only the portion of the expenses and taxes inherent to the acquisition that corresponds to the construction and, where applicable, all the investments and improvements made will be considered as "acquisition cost paid".

  2. Cadastral value, excluding the value of the land.

  When the value of the land is not known, it will be calculated by prorating the acquisition cost paid between the cadastral values of the land and the construction of each year reflected in the corresponding receipt for the Real Estate Tax (IBI).

  Limit on accumulated depreciation of real estate

  The limit of accumulated amortization will be the acquisition value of the property generating the income. Therefore:

  • In the case of assets acquired for valuable consideration, the accumulated depreciation may not exceed the acquisition cost of the property, which corresponds to its acquisition value in accordance with article 35 of the Income Tax Law (excluding value of the land from the calculation).
  • In the case of properties acquired for profit, the limit of accumulated depreciation, in global calculation, may not exceed the acquisition value in accordance with article 36 of the Personal Income Tax Law, excluding the value of the land from the calculation.

  Example:

  Mr. RRR acquired by inheritance a property whose value attributed in the settlement of the Inheritance and Gift Tax (ISD) and which appears in the public deed of inheritance award was 100,000 euros.

  The costs and taxes inherent to the acquisition (notary, registration, ISD) amount to 2,000 euros.

  The cadastral value of the inherited property: 80,000 euros.

  The percentage that the value of the land represents in relation to the total value of the property is 20%.

  Once inherited, the property was leased to third parties.

  Calculate the depreciation corresponding to a property that is rented and the deductible accumulated depreciation limit.

  Solution:

  1. Amortization calculation .

     The highest of the following values will be taken for the calculation of amortization:

     • Acquisition cost satisfied: (80% s/2,000) : 1,600
     • Cadastral value excluding land value: (80% of 80,000): 64,000

     The amount of depreciation deductible as an expense to determine the real estate capital yield will be the result of applying the percentage of 3% on the highest of the previous values, in this case the cadastral value excluding the value of the land.

     Therefore, in this case the amount of deductible amortization will be 3% of 64,000 euros = 1,920.00 euros

  2. Accumulated amortization limit.

     The taxpayer may depreciate the property until the accumulated depreciation amount reaches the value of the property for ISD purposes (excluding the value of the land from the calculation), that is, 80% x (100,000 + 2,000) = 81,600 euros.

• Personal property transferred together with the property

  They will be amortizable provided that they can be used for a period of time greater than one year.

  The annual deductible amortization for each of the transferred assets shall be deemed to meet the effectiveness requirement when its amount does not exceed the result of applying to its respective acquisition costs the amortization coefficients that correspond to it in accordance with the simplified amortization table approved by Order of March 27, 1998.

  This table includes, among others, the following maximum amortization coefficient: Facilities, furniture and equipment: 10 percent.

• Rights or powers of use or enjoyment over real estate

  They will be amortizable provided that their acquisition has entailed a cost for the taxpayer. In these cases it is necessary to distinguish:

  1. If the right or faculty has a fixed term, the deductible annual amortization will be the result of dividing the acquisition cost paid by the number of years of duration of the same.
  2. If the right or faculty is for life, the computable amortization will be the result of applying the coefficient of 3% on the acquisition cost paid.

  In both cases, the amount of deductible amortization in the financial year may not exceed the amount of gross income derived from each right.