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V0046-16 8 January 2016 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · ganancia patrimonial

Sale of urbanised land managed by the municipality constitutes capital gains rather than business income

A landowner has enquired whether the sale of land urbanised at the initiative of the City Council allows for the application of reduction coefficients. The DGT has determined that, as the owner is not engaged in a property development business, the sale constitutes a capital gain.

The question raised

Whether the sale of urbanized land gives rise to a capital gain to which the reduction coefficients established in the ninth transitional provision of the Personal Income Tax Law are applicable.

The DGT's ruling

The sale of urbanized land by the City Council, where the owner only pays assessments without managing the urbanization, generates capital gains or losses. The reduction coefficients of the ninth transitional provision may be applied to assets not used for economic activities acquired before 1994. However, said coefficients shall not apply to the portion of the gain resulting from the urbanization improvement, as it was not carried out before 1994. The transfer value must be broken down between the value of the land and that of the improvement according to its market value.

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