The Supreme Court in its Ruling of 15 September 2021 (3483/2021) ruled that the acquisition value applicable in Personal Income Tax for the calculation of the depreciation of a property acquired by inheritance or free of charge will be that taxed in Inheritance and Donations
The Abogado del Estado filed an appeal in cassation before the High Court in which he raised two questions of objective appeal.
The first question concerns the interpretation to be given to Article 23.1.b) of the LIRPF Law as to the amount to be considered as the basis for the depreciation of property acquired by inheritance or free of charge.
The second question raised is whether the expenses of the aforementioned article should be admitted only in proportion to the period during which the property was rented.
In resolving the first question, the Supreme Court has established as a doctrine, ratifying what was established in the appealed judgment of the High Court of Justice of the Valencian Community (30 May 2019), that the depreciable acquisition value for Personal Income Tax (IRPF) of a property inherited or acquired free of charge must be the one declared in the Inheritance and Gift Tax or the one verified by the Administration.
Prior to this ruling, the Treasury followed the criterion that the acquisition cost for the calculation of the depreciation in the IRPF of a leased property, which had been acquired by inheritance or donation, should be the cadastral value. This had also been established by the Directorate General of Taxes in several binding consultations. The Supreme Court rejects this interpretation and considers, to the benefit of the taxpayer, that the criterion followed until now “ignores the correct meaning of depreciation as a univocal concept” and establishes that depreciation is a term that does not require for its effectiveness that an investment has previously been made.
The meaning of the provision of the law, which does not distinguish between property acquired against payment or free of charge, would be distorted if magnitudes that have no relation to each other were compared.
This means that taxpayers can request the rectification of their personal income tax returns corresponding to non-prescribed tax years and request the appropriate refund due to the fact that a higher amount of depreciation expense is deductible. With regard to the second question, it reiterates the criterion established by the Supreme Court itself in its recent ruling of 25 February 2021 (1302/2020), which determines that expenses associated with real estate intended to be leased are only deductible for the time during which said real estate was leased and generated income.