In order to determine the net return on real estate capital, Article 23.1.b) of Law 35/2006 on Personal Income Tax allows for the reduction, among other items, of the amounts destined to the depreciation of the real estate and of the assets transferred jointly, provided that they reflect a real depreciation. In this article, we are going to examine specifically the depreciation in cases of rental of real estate obtained by inheritance or donation, that is to say, free of charge.
Deductible depreciation
Change in the depreciation base criterion
Criteria accepted by Management
Deductible depreciation
Article 14 of the Tax Regulations establishes that, for real estate, depreciation will be considered effective when it does not exceed 3% of the higher of the following values: the acquisition cost paid or the cadastral value, excluding the value of the land. Until now, the Tax Administration understood that "acquisition cost paid" referred only to the expenses and taxes related to the acquisition paid by the taxpayer, including Inheritance and Gift Tax.
Therefore, the depreciation base used to be the cadastral value of the property, since it was generally higher than the simple expenses and taxes of the lucrative acquisition.
On the change in the criterion of the depreciation base A change in criterion arises from the Supreme Court, which by its Ruling of September 15, 2021 (appeal 5664/2019) determined that "acquisition cost paid" must include the value of the property itself. Consequently, the depreciation base for real estate acquired free of charge is composed of the value in accordance with the Inheritance and Gift Tax, added to the expenses and taxes related to the acquisition.
Criterion accepted by the Administration The criterion of the Supreme Court has been supported by the Administration, both by the economic-administrative courts (TEAC Resolution 0356/2020, of June 28, 2022) and by the Directorate General of Taxes (DGT CV1693-22, of July 15).