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Practical Income Manual 2020.

Net performance

The net return is made up of the difference between the total income and the deductible expenses in the terms previously mentioned.

Remember: The total amount to be deducted for the interest on foreign capital invested in the acquisition or improvement of the property, right or enjoyment from which the income comes, and other financing expenses, as well as repair and conservation expenses, may not exceed, for each property or right, of the amount of the full returns obtained.

The operations necessary to determine the amount of the net return on real estate capital that is integrated into the tax base are represented in the following scheme:

(+) Full returns

  • The amount that the acquirer, assignee, lessee or subtenant must pay for all concepts, including, where applicable, the amount corresponding to all those assets transferred with the property.
  • In the absence of proof or in the case of linked transactions, the valuation of said returns will be carried out at their normal market value.
  • When received from family members, be it the spouse or relatives, including relatives, up to and including the third degree, the total net income may not be less than the imputed income derived from said property.

(−) Expenses necessary to obtain deductible income (excluding VAT or IGIC):

  • Interest and other financing expenses.

  • Maintenance and repair costs

    • * Limit of the two previous expenses: They cannot exceed, for each asset or right, the amount of the full income obtained.
    • * Excess over the limit: The excess can be deducted in the following four years.
  • Taxes, surcharges and fees
  • Doubtful balances
  • Insurance contract premiums
  • Supplies
  • Contract formalization costs
  • Legal defense expenses.
  • Amounts accrued by third parties as a result of personal services (including administration, porterage).
  • Other necessary tax-deductible expenses

(−) Amounts destined for amortization:

  • Property: 3 percent of the highest of the following values:

    1. Acquisition cost satisfied that corresponds to the construction
    2. Cadastral value, excluding land value

  • Movable property transferred together with the property: Order of March 27, 1998.

  • Rights or powers of use or enjoyment of real estate

    1. Of fixed duration: acquisition cost between the number of years of duration.
    2. Lifelong: 3 percent of the acquisition cost satisfied

(=) Net return on movable capital .