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Practical manual for Income Tax 2020.

Transitory rules: Amortization of assets subject to reinvestment by small companies

Regulations: Twenty-eighth transitional provision LIS

Holders of economic activities that determine net income by the direct estimation method and were applying, prior to January 1, 2015, the amortization of assets subject to reinvestment that was regulated for small companies by article 113 of the consolidated text of the LIS , approved by Royal Legislative Decree 4/2004, of March 5, may continue to apply it, with the requirements and conditions established in that article. 

For these purposes, the aforementioned article allowed the amortization of the elements of tangible fixed assets and real estate investments assigned to the economic exploitation in which the reinvestment of the total amount obtained in the onerous transfer of elements of tangible fixed assets and real estate investments also assigned had been materialized, based on the coefficient resulting from multiplying by 3 the maximum linear amortization coefficient provided for in the officially approved amortization tables.

The requirements established in article 113 of the consolidated text of the LIS to apply this incentive were the following:

  1. That in the year in which the tangible fixed assets and real estate investments were transferred, the businessman or professional was the owner of a small company.
  2. That the transferred element was for a consideration, this benefit not being applicable to lucrative transfers.

  3. That the investment was made within the period between the year prior to the date of delivery or availability of the transferred item and the three years thereafter.

    The reinvestment was understood to have taken place on the date on which the assets in which the amount obtained from the transfer was made available were made available.

  4. That the total amount obtained from the transfer be reinvested. When the amount invested was less or greater than that obtained in the transfer, accelerated amortization was applied only to the amount of said transfer that was subject to reinvestment.

Note: Please note the particularity that article 106 of the LIS establishes for small entities in financial leasing contracts, which is discussed in the section devoted to leases and fees within "Tax-deductible expenses" of this Chapter.