Other expenses necessary to obtain returns

Regulations: Articles 23.1 a) 2 to 4 Law IRPF and 13 b) ag) Regulation IRPF

1. Taxes, surcharges and fees

Non-state taxes and surcharges are deductible, as well as state fees and surcharges such as, for example, IBI , fees for cleaning, garbage collection, lighting, etc., provided that:

1. They affect the computed returns or the assets or rights that produce them.

2. They are not of a punitive nature.

2. Amounts accrued by third parties as a result of personal services

Amounts accrued by third parties as direct or indirect compensation or as a result of personal services, such as administration, surveillance, concierge, garden care, etc. ## are deductible.

In particular, the fees of the community of owners when it comes to properties under a horizontal property regime.

3. Contract formalization and legal defense costs

Expenses incurred by the formalization of the lease, sublease, transfer or establishment of the right and those of legal defense related to the assets, rights or income are deductible.

4. Doubtful debts

In 2023, doubtful debts are deductible, provided that this circumstance is sufficiently justified. This circumstance is considered sufficiently justified:

1. When the debtor is in a situation of bankruptcy.

2. When more than six months have elapsed between the time of the first collection action carried out by the taxpayer and the end of the tax period, and no credit renewal has occurred.

The operation of the deductibility of doubtful debt balances is conditional on the prior inclusion of their amount as full income from real estate capital, since these incomes are imputed to the tax period in which they are payable by their recipient, as provided in article 14.1.a) of the Tax Law.

When a doubtful balance is collected after its deduction, it will be computed as income in the year in which said collection occurs.

5. Insurance contract premiums

Premiums for insurance contracts, whether for civil liability, fire, theft, glass breakage or others of a similar nature, on the assets or rights that produce the income are deductible.

6. Services or supplies

Amounts used for services or supplies (water, electricity, gas, internet, etc.) are deductible.

These expenses will only be deductible to the extent that they are effectively borne and paid by the lessor , such that, if it were the lessee who pays and bears them, the lessor could not deduct any amount. However, it must be taken into account that, if the amounts of these expenses are passed on to the tenant, they will be computed as full income from the real estate capital, being in turn deductible from said income.

7. Other necessary tax-deductible expenses

In addition to the concepts specifically listed above, any other expenses are considered tax deductible provided they are necessary to obtain the corresponding income.

Important: in relation to the annual expenses referred to above, only those expenses corresponding to the period of time in which the property is rented and generates income will be deductible, in the proportion corresponding to the principle of correlation of income and expenses. Consequently, those expenses generated during the time in which the property is not rented, even if it is ready to be rented (in expectation of renting), are not considered deductible for the purposes of article 23.1 of the Personal Income Tax Law. 270/2021, of February 25 ( ROJ : STS 910/2021).