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A taxpayer inquired whether they could take out a new loan to repay a portion of an old debt used to finance the extension of their main residence. The Directorate General for Taxes (DGT) ruled that this would be classified as a substitution of debt rather than a reduction of the debt itself.
Taxpayers seeking to claim tax relief for investments in their main residence must ensure that any refinancing is not interpreted as a mere substitution of debt, which would disqualify the deduction.
The tax team reviews your specific situation.
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