Expenses necessary to obtain returns: interest and other financing and conservation and repair expenses

Regulations: Articles 23.1 a) 1 Law Personal Income Tax and 13 a) Regulations

The following are considered included among the expenses necessary to obtain the returns, among others:

1. Interest and other financing costs

   Interest and other financing expenses of third-party capital invested in the acquisition or improvement of the asset, right or power of use or enjoyment, as well as, where applicable, the assets transferred with it, are deductible.

   Important: the interests that, due to the application of floor clauses, would have been paid by the taxpayer in 2019 and with respect to those that, before the end of the deadline for submitting self-assessment of personal income tax for said year ( July 1, 2020), the agreement to refund the amount is reached with the financial institution or as a result of a court ruling or arbitration award, they cannot be deducted as an expense. See chapter 2 . 

2. Conservation and repair

   The costs of conservation and repair of the assets that produce the income are deductible. For these purposes, they have this consideration:

   1. Those carried out regularly with the purpose of maintaining the normal use of material assets, such as painting, plastering or repairing facilities.
   2. Those for replacing elements, such as heating installations, elevators, security doors or others.

   The amounts intended for the expansion or improvement of the assets are not deductible for this concept, as they constitute a greater acquisition value whose recovery is carried out through the corresponding amortizations.

Maximum deduction limit for the two previous concepts of necessary expenses

• The maximum total amount to be deducted for interest and other financing expenses and for conservation and repair expenses may not exceed, for each asset or right, the amount of the full returns obtained.

  The excess may be deducted in the following four years, without exceeding, together with the expenses for these same concepts corresponding to each of these years, the amount of the full returns obtained in each of them, for each asset. or right.

• The amount pending deduction for the years 2015, 2016, 2017 and 2018 will be applied in the 2019 declaration with priority to the amounts that correspond to the 2019 financial year itself for these same concepts. The amount to be deducted will be recorded in box [0104] of the declaration.

  For its part, the amount corresponding to the year 2019 that is applied in the declaration will be indicated in box [0107] and the amount that, due to the application of the maximum deduction limit, is dependent on deduction will be recorded in box [0108 ] for the purposes of deduction in the following four years.

  In the event that there are several lease contracts in the year for the same property, the maximum limit of the amount to be deducted for interest and conservation and repair expenses must be computed taking into consideration the amounts paid in the year and the full income obtained. in it, so, for some of the lease contracts, the amount deducted for interest and conservation and repair expenses could exceed the income obtained.