Of all the items that add to the acquisition value, this is the only one that is genuinely argued over. The others are notary invoices or tax receipts, and there is nothing to debate there. Building work, on the other hand, has to be classified: if what you did was an improvement, it adds to the acquisition value and reduces your gain; if it was a repair, it adds nothing, however expensive it was. A thirty-thousand-euro renovation classified the wrong way moves several thousand euros of tax, and it is one of the few things about a sale that can still be prepared years ahead.
Where it is written, and why the tax statute is not enough
The Spanish personal income tax Act (IRPF) says the acquisition value includes "the cost of the investments and improvements made to the assets acquired". And there it stops: the tax legislation does not define what an improvement is. The IRPF Regulations, from the other side, describe upkeep and repair costs as those incurred regularly to keep the asset in normal use, and expressly mention painting, rendering, fixing installations and replacing items such as the heating, the lift or security doors.
For the concept of improvement, the administration turns to accounting, and specifically to the resolution of the Spanish Accounting and Audit Institute (ICAC) of 1 March 2013 on tangible fixed assets and property investments, which the tax agency's own income tax campaign manual points to. There an improvement is understood as the set of works that alter the asset by increasing its previous productive efficiency, and an extension as the process of adding new elements to obtain greater capacity.
It is not "was the work necessary?" or "was it expensive?" or "is it nicer now than before?". It is this: after the work, is the property worth more, will it last longer or can it do more than before the work, or has it simply been put back the way it was? Putting it back to its previous state is a repair. Taking it beyond its previous state is an improvement.
The map of both sides
| Usually treated as a repair | Usually treated as an improvement or extension |
|---|---|
| Painting, skimming walls, removing textured plaster | Enclosing a terrace and turning it into usable floor space |
| Replacing a broken boiler with an equivalent one | Installing heating or air conditioning where there was none |
| Fixing damp, stripping back and making good | Adding a bathroom, a bedroom or a mezzanine |
| Changing taps, sanitary ware or a worn worktop | Installing a lift in a building that had none |
| Replacing the floor with one of similar characteristics | A full refurbishment that changes the layout and the installations |
| Replacing a blind, a lock or a door | Solar panels, aerothermal heating or home automation built into the property |
The table helps, but it does not decide. The specific case decides, and in fact the two sides of the same line cross all the time. Replacing old windows with equivalent windows is a repair; replacing them with thermally broken frames that verifiably improve insulation has arguments for improvement. Replacing a boiler with one of the same output is a repair; replacing it with a different system that increases the property's efficiency can be defended as an improvement. The word that always comes up is "verifiable", and that is why what follows matters more than the table.
The full renovation: the mistake of putting it all in one bag
A complete renovation is almost never one thing. Within the same quote you find the replacement of the old wiring (a repair) alongside the new bathroom that did not exist before (an extension), the tiling that replaces what was there (a repair) and the enclosure that gains square metres (an improvement). Whoever takes the whole amount to the acquisition value risks having all of it thrown out; whoever leaves all of it out pays too much.
And ask for the invoice broken down the same way. A builder who invoices "full renovation of dwelling, 34,000 euros" leaves you with no arguments ten years later, because there is no way of separating which part altered the property and which part maintained it. A quote by chapters (masonry, plumbing, carpentry, new bathroom, enclosure) can be defended item by item. It costs the same and is worth far more.
The evidence, which is what this is really about
In a tax check nobody disputes whether the work exists: it can be seen. The question is whether it is proven, and with what. The order of strength is this:
- A full invoice. With the issuer's tax number, date, description of the items and VAT shown separately. Not a quote, not a receipt, not a delivery note, not a bank transfer marked "works". Without an invoice the item does not count, even if the work is obvious to the naked eye.
- Traceable proof of payment. Bank transfer, named cheque or card. Quite apart from the legal limits on cash payments in certain transactions, cash leaves precisely the person who paid without proof.
- A building licence or declaración responsable (the responsible declaration filed with the town hall for minor works). It is the document that best proves the work altered the property rather than merely maintaining it, because the town hall itself had to classify it in order to authorise it.
- A change recorded in the Catastro, the land registry for tax purposes. If the work changed the built area or the use and was declared to the Catastro, there is an independent administrative trail supporting the improvement classification.
- Before and after photographs and plans. They are not formal evidence, but they explain in three seconds what a quote does not say.
The order matters: the licence and the Catastro change turn an arguable point into a documented one, and they cost nothing at the time of the work. Ten years later they cannot be manufactured.
Five cases that keep coming up
| Case | How it is approached |
|---|---|
| A derrama (a one-off levy by the community of owners) to install a lift | It is an improvement to the building attributed to each owner in their share. You need the administrator's certificate with the individual amount and the owners' meeting resolution. A levy to repair the roof, by contrast, is upkeep. |
| Work done without a licence | The lack of a licence does not by itself prevent the work from being an improvement, but it weakens the evidence a great deal and may drag in a planning problem that has nothing to do with tax. It is worth looking at both together. |
| Furniture, kitchen and appliances | Furniture is not part of the property. Items that are permanently built in (the fitted kitchen units, the air conditioning installed during the works) are easier to defend than those you could take with you in a removal van. |
| The work was done by the previous owner | It does not add. What counts is what you paid to acquire and what you invested afterwards. The previous seller's work is already inside the price you paid. |
| Work done by a relative or without paperwork | No invoice, no item. It is harsh, but that is where things stand, and there is no retroactive fix. |
The overlap with letting, which throws many people
If the property was let, the same work has two different tax lives, and they are mutually exclusive.
- What was upkeep and repair was a cost deductible from the rental income, capped at the gross income from that property and with the excess carried forward to later years. It was used then, and it is not used again on the sale.
- What was an improvement was not a cost: it became part of the property's value and is depreciated. On the sale it adds to the acquisition value, but reduced by the depreciation that applies to it, just like the rest of the building.
This is exactly what the guide on minimum depreciation explains, and it is worth reading alongside this one: adding the improvement without taking off its depreciation is as wrong as not adding it at all.
What to do, and when
If you have not sold yet, the job is filing: gathering invoices, finding licences, asking the administrator for the levy certificates and keeping everything together with the purchase deed. If you have already sold, the job is reconstruction, and it is done with whatever exists: banks keep statements, town halls keep licence files, the Catastro keeps its records of changes and many builders keep copies of old invoices.
We go through it item by item, tell you which ones we will stand behind and with what, and which ones we leave out because the evidence will not hold. And we say so before filing, not after: one weak item in the wrong place turns a quiet refund into a tax check. If you would like us to look at it, tell us about the transaction in the property sale intake form. What we will never do is assure you that the administration will accept a classification: this is defended, not guaranteed.
What happens if the administration reclassifies an item
It is worth knowing what you are exposed to when you include arguable work. If an item is rejected in a check, an assessment is issued for the difference in tax, with late-payment interest from the end of the filing period. So far, arithmetic.
The next question is whether penalty proceedings are opened as well, and that is not automatic: it depends on whether fault is found, and a reasonable classification, documented and resting on a defensible position, is what allows you to argue there was none. That is why the order of work matters so much. An improvement backed by invoice, licence and Catastro change is a position that can be defended; the same work with no paper at all is an item that should never have been included, and the reasonableness argument weakens by itself.
That is why we say item by item what we stand behind and what we do not, and record the approach taken inside the file. It is the difference between arguing about a classification and having to explain why something was included with nothing to back it.
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