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Practical manual for Income Tax 2020.

Net performance

Net income is made up of the difference between gross income and deductible expenses in the terms discussed above.

Remember: The total amount to be deducted for the interest on third-party capital invested in the acquisition or improvement of the asset, right or enjoyment from which the income comes, and other financing expenses, as well as repair and maintenance expenses, may not exceed, for each asset or right, the amount of the total income obtained.

The operations necessary to determine the amount of net income from real estate capital that is included in the tax base are represented in the following diagram:

(+) Full returns

  • The amount that the purchaser, transferee, lessee or sub-lessee must pay for all concepts, including, where applicable, the amount corresponding to all assets transferred with the property.
  • In the absence of proof or in the case of related-party transactions, the valuation of such returns will be carried out at their normal market value.
  • When received from family members, whether spouses or relatives, including in-laws, up to the third degree inclusive, the total net income may not be less than the imputed income derived from said property.

(−) Expenses necessary to obtain deductible income (excluding VAT or IGIC):

  • Interest and other financing costs.

  • Maintenance and repair costs

    • * Limit of the two previous expenses: They may not exceed, for each asset or right, the amount of the gross income obtained.
    • * Excess over the limit: The excess can be deducted in the following four years.
  • Taxes, surcharges and fees
  • Doubtful debts
  • Insurance contract premiums
  • Supplies
  • Contract formalization costs
  • Legal defense expenses.
  • Amounts accrued by third parties as a result of personal services (including administration, concierge).
  • Other necessary tax-deductible expenses

(−) Amounts allocated to amortization:

  • Property: 3 percent on the highest of the following values:

    1. Acquisition cost satisfied corresponding to the construction
    2. Cadastral value, excluding the value of the land

  • Personal property transferred together with the property: Order of March 27, 1998.

  • Rights or powers of use or enjoyment over real estate

    1. Fixed-term: acquisition cost divided by the number of years of duration.
    2. Lifetime: 3% of the acquisition cost paid

(=) Net income from movable capital .