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A tenant inquired whether compensation received for vacating an old-regime rental property could be exempt from tax if the funds are reinvested in a primary residence. The Directorate General for Taxes (DGT) ruled that the amount constitutes a capital gain and that the reinvestment exemption does not apply, as the inquirer is not the owner of the leased property.
This ruling clarifies that compensation for terminating a lease is treated as a capital gain rather than a reduction in the cost of the asset, thereby preventing tenants from accessing tax relief intended for homeowners reinvesting in their primary residence.
The tax team reviews your specific situation.
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