Expenses necessary to obtain returns: interest and other financing and conservation and repair expenses

Regulations: Articles 23.1 a) 1 Law IRPF and 13 a) Regulation

The following are considered to be included among the expenses necessary to obtain the returns, among others:

1. Interest and other financing costs

   Interest and other financing costs of third-party capital invested in the acquisition or improvement of the asset, right or faculty of use or enjoyment, as well as, where applicable, the assets transferred with it, are deductible.

   Important: the interest that, due to the application of floor clauses, would have been paid by the taxpayer in 2019 and in respect of which, before the end of the deadline for filing the self-assessment of IRPF for said year (July 1, 2020), an agreement is reached to return its amount with the financial institution or as a result of a court ruling or arbitration award, may not be deducted as an expense. See chapter 2 . 

2. Conservation and repair

   The costs of maintenance and repair of the assets that generate the income are deductible. For these purposes, the following are considered:

   1. Those carried out regularly for the purpose of maintaining the normal use of material assets, such as painting, plastering or repairing facilities.
   2. Those for replacing elements, such as heating systems, elevators, security doors or others.

   Amounts used to expand or improve assets are not deductible under this concept, as they constitute a higher acquisition value whose recovery is carried out through the corresponding amortizations.

Maximum deduction limit for the two necessary expense concepts above

• The maximum total amount to be deducted for interest and other financing costs and for maintenance and repair costs may not exceed, for each asset or right, the amount of the gross income obtained.

  The excess may be deducted in the following four years, without exceeding, together with the expenses for these same concepts corresponding to each of these years, the amount of the gross income obtained in each of these years, for each asset or right.

• The amount pending deduction from the years 2015, 2016, 2017 and 2018 will be applied in the 2019 declaration with priority to the amounts corresponding to the year 2019 itself for these same concepts. The amount to be deducted will be entered in box [0104] of the declaration.

  For its part, the amount corresponding to fiscal year 2019 that is applied in the declaration will be indicated in box [0107] and the amount that, due to the application of the maximum deduction limit, remains dependent on deduction will be entered in box [0108 ] for the purposes of its deduction in the following four fiscal years.

  In the event that there are several lease contracts in the year for the same property, the maximum limit of the amount to be deducted for interest and maintenance and repair expenses must be calculated taking into consideration the amounts paid in the year and the total income obtained in it, so that, for some of the lease contracts, the amount deducted for interest and maintenance and repair expenses could exceed the income obtained.