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V0020-15 7 January 2015 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · actividad económica

Land sales may be taxed as capital gains or business income depending on their use

A taxpayer has enquired about the taxation of three options regarding the sale or contribution of land. The DGT clarifies that if the land is not used for a business activity, it is taxed as capital gains or losses. However, if real estate development activities are carried out, the sale of the land is treated as income from a business activity.

The question raised

Taxation under Personal Income Tax (IRPF) of the three aforementioned options.

The DGT's ruling

Real estate development for subsequent sale constitutes an economic activity. If the land is not assigned to said activity, its sale or contribution to a company generates capital gains or losses. If the taxpayer carries out development activities, the land becomes inventory and its sale generates income from economic activities included in the general tax base. In the case of compensation boards, the nature of the activity will depend on the management and effective participation of the members.

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