Transfer of assets from business or professional assets to personal assets: disaffection
Regulations: Articles 28.3 Personal Income Tax Law and 23 Regulations
Principles and rules of disaffection
The principles and rules for the transfer of assets or rights are the following:
The transfer of fixed assets from the business environment to the personnel of the taxpayer does not produce a change in assets as long as the asset element continues to form part of their assets .
The incorporation of the asset or right into personal assets is carried out for its net book value on the date of the transfer .
The components of book value are discussed in Chapter 11.
The disaffection does not require any passage of time for it to be considered consummated from the moment it is carried out.
Notwithstanding the foregoing, if the disaffected asset element is disposed of before 3 years have elapsed since the disaffection, even if this had occurred as a consequence of the cessation of the activity, the reducing percentages will not be applicable referred to in the ninth transitional provision of the Personal Income Tax Law in the determination of the capital gain obtained.
The ninth transitional provision of the Personal Income Tax Law establishes a special reduction regime applicable to capital gains derived from the transfer of unaffected assets and those disaffected more than three years in advance. at the date of transmission, acquired before December 31, 1994. The detailed commentary on this transitional regime of reduction of capital gains is contained in Chapter 11.
Don FRG, a dental doctor, sets up his office on January 1, 2021 in a premises he owns that has remained rented since its acquisition until December 31, 2017 and between 12/31/17 and 12/31/19 he intended for own use, with said date recorded in its investment property record book.
The aforementioned premises were acquired by Don FRG on May 1, 1985 for the equivalent of 60,000 euros, with the holder also paying the Tax on Property Transfers and Documented Legal Acts, the notary and the Property Registry, the equivalent of 5,000 euros.
During the years in which the premises were rented, the acquisition value of the property has been higher than its cadastral value.
To determine the basis of amortization, the value of the land is estimated to amount to an amount equivalent to 18,000 euros.
On May 31, 2021, he moved his practice to another location, proceeding to rent the previous location again for 900 euros per month.
Determine the tax treatment of said operations and whether the premises can be considered affected by the activity during fiscal year 2021.
1. Affectation of the premises (01-01-2021):
The impact of the commercial premises on the professional activity is understood to have occurred on January 1, 2021, as from that date the requirements for the necessary and exclusive use of the premises for the development of the activity and accounting are met.
The incorporation of the premises into the investment property record book must be carried out for the following value:
Actual purchase amount: 60,000
Expenses and taxes inherent to the acquisition: 5,000
Less: Fiscal amortization deductible (05-01-1985 to 12-31-2017) (1)
Year 1985: (47,000 x 1.5%) x 8/12 = 470
Years 1986 to 1998: (47,000 x 1.5%) x 13 = 9,165
Years 1999 to 2002: (47,000 x 2%) x 4 = 3,760
Years 2003 to 2017: (47,000 x 3%) x 15 = 21,150
Total amortizations: 34,545
Impact value (65,000 – 34,545) = 30,455
(1) For the purposes of determining the amortization base, the value of the land (18,000 euros) has been deducted. Likewise, the percentage of 1.5 percent has been taken as the amortization percentage for the years 1985 to 1998, which was tax deductible while the premises were leased in the aforementioned years. For the years 1999 to 2002, the usable percentage is 2 percent [Article 13.2, letter a) of the Tax Regulations in force in the aforementioned years]. For the years 2003 to 2017, the applicable percentage is 3 percent [for the years 2003 to 2006, article 13.2, letter a), of the Personal Income Tax Regulation in the wording given therein by Royal Decree 27/2003, of January 10, and for the years 2007 to 2017, article 14.2, letter a) of the Personal Income Tax Regulation]. (Back)
2. Disaffection of the local (05-31-2021) (2)
When the premises are vacated on May 31, 2021, their incorporation into the owner's personal assets will be carried out at the net book value of the premises on that date. This value is determined as follows:
Impact value = 30,455
Less: Repayments (01-01-2021 to 05-31-2021) (3)
Year 2021: 12,455 x 3%) x 5/12 = 155.69
Total amortizations: 155.69
Net book value (30,455 – 155.69) = 30,299.31
(2) The transfer of the consultation to another location on May 31, 2021 implies its disaffection from the economic activity carried out by its owner. However, the subsequent rental of the premises does not prevent it from being considered fully affected during the period in which the consultation was installed (from January 1, 2021 to May 30, 2021). (Back)
(3) The taxable amortizations coincide with those carried out by the owner of the activity and correspond to the maximum linear amortization coefficient for this type of asset element, assuming that it determines the net return by simplified direct estimation. Maximum coefficient for buildings, according to simplified table: 3 per 100. The value of the land (18,000 euros) is not subject to amortization. Consequently, the amortizable value is 12,455, the difference between 30,455 (affected value) and 18,000 (land value). (Back)