7.4.6.3. Deductible expenses

For the determination of net yield, the following expenses will be deducted from the full yields:

1. All the expenses required to obtain the returns. The following expenses will be considered as necessary to obtain the returns, among others:

   • The interests of external capital invested in the acquisition or improvement of the good, right or right of use and enjoyment of which the returns are applicable, and other financing expenses, as well as the costs of repairing and preserving the property.

     The amounts that, for the application of floor clauses, had been paid by the taxpayer in 2018 and with respect to which, before the end of the period for filing the tax return, the agreement to return the tax returns with the financial institution or in compliance with court rulings or arbitral awards will be reached, it will not be considered a deductible expense.

     The total amount to be deducted for these expenses may not exceed the total amount of the full income obtained for each asset or right. The excess can be deducted in the following four years.

   • Non-state taxes and surcharges, as well as state fees and surcharges, whatever their name, provided that they affect the incomes counted or the good or right that they produce and are not of a penalty nature.

   • Doubtful receivables under the conditions established by regulations.

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

2. The amounts intended for the depreciation of the property and of the other assets transferred with it, provided that they correspond to their actual depreciation, under the conditions that are determined by regulations.

Taxable COSTS OF THE INMOBILITY CAPITAL RETURNS (Article 13 (l)

All expenses required to obtain the income will be considered deductible expenses to determine the net return on real estate.

In particular, the following shall be considered to be included, among others:

1. The interests of external capital invested in the acquisition or improvement of the good, right or right of use or enjoyment from which the yields and other financing expenses come, as well as the conservation and repair costs.

   For these purposes, the following shall be considered as repair and maintenance costs:

   • Those carried out regularly in order to maintain the normal use of the material goods, such as painting, revoking or arranging of facilities.

   • Replacement of elements, such as heating, lift, security doors or others.

   The amounts allocated to enlargement or improvement will not be deductible for this item.

   Note:

   The total amount to be deducted for these expenses may not exceed, for each asset or right, the amount of the full yields obtained.

   The excess may be deducted in the following four years, without it being able to exceed, together with the expenses for these same concepts corresponding to each

   One of these years, of the amount of the full yields obtained in each of them, for each good or right.

2. Non-state taxes and surcharges, as well as state fees and surcharges, whatever their name, provided that they affect the incomes counted or the property or rights produced by them and are not of a penalty nature.

3. Amounts accrued by third parties in direct or indirect consideration or as a result of personal services, such as administrative, surveillance, brokerage or similar services.

4. Those caused by the arrangement of the lease, subletting, assignment or constitution of rights and those of legal defence relating to the assets, rights or returns.

5. Doubtful receivables, provided that this circumstance is sufficiently justified. This requirement shall be deemed to be met:

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

   2. When more than six months have passed between the time of the first collection management carried out by the taxpayer and the end of the tax period, and no credit renewal has taken place.

   When a doubtful balance is subsequently collected after deduction, it will be counted as a deposit in the financial year in which this payment occurs.

6. The amount of insurance contract premiums, whether civil liability, fire, theft, breakage of windows or other similar, on the assets or rights that produce the returns.

7. Amounts for services or supplies.

8. The amounts used for the amortisation under the conditions established in the article in the regulations.

Depreciation COSTS FOR THE INMOBILIARY CAPITAL RETURNS (article 14 of the Act)

For the determination of the net return on real estate capital, the amounts used to repay the property and other assets transferred with it will be considered deductible expenses, provided that they correspond to their actual depreciation.

Repayments shall be deemed to meet the effectiveness requirement:

1. With regard to properties: When, in each year, they do not exceed the result of applying 3% to the highest of the following values: 100 The cost of acquisition paid or the cadastral value, not including the cost of the land in the calculation.

   When the value of the land is not known, it will be calculated by pro rata the acquisition cost paid between the land registry values and the construction of each year.

2. With regard to movable property, which can be used for a period of more than one year and transferred jointly with the property: When, in each year, they do not exceed the result of applying the depreciation coefficients determined according to the approved depreciation table for the simplified direct estimate regime to the acquisition costs.

Real rights of use and enjoyment

If the returns are derived from the ownership of real rights of use or enjoyment, their acquisition cost paid may be amortised, with the limit of the full returns of each right.

The amortisation, in this case, will be the result of the following rules:

1. When the right or power has a specific term, the amount resulting from dividing the cost of acquisition of the right by the number of years of its duration.

2. When the right or power of attorney is life annuity, the result of applying the percentage of 3 per 100 to the acquisition cost paid.

Acquisition cost

The cost of acquisition is satisfied:

• In the case of properties acquired for consideration : The acquisition price including the expenses and taxes inherent to the acquisition (notary, registry, non-deductible VAT, Property Transfer Tax and Stamp Duty, agency expenses, etc.), as well as the cost of the investments and improvements made.
• In the case of properties acquired for free (inheritance or donation): The value of the asset determined according to the rules of Inheritance and Donations Tax, without it being able to exceed the market value, together with the expenses and taxes paid for its acquisition, as well as the cost of the investments and improvements made.