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V0349-23 20 February 2023 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · valor de adquisición

Improvement or extension works may be included in the acquisition value of a sold property

The inquirer asks whether improvement works on their former home can increase its acquisition value and whether a prefabricated house can be considered a primary residence for the reinvestment exemption. The DGT rules that improvements or extensions do count towards the acquisition value, whereas repairs do not, and that a prefabricated house may qualify as a primary residence if it meets habitability and residency requirements.

The question raised

1st Consideration of the improvement works carried out on their previous primary residence as an increase in acquisition value for the purposes of calculating the capital gain generated by its sale.

The DGT's ruling

Investments that involve an expansion or improvement (increase in capacity, habitability, or useful life) form part of the acquisition value, whereas repair and maintenance expenses do not. A prefabricated house may be considered a building and, therefore, a primary residence if it is equipped for such purpose and the requirements of ownership, effective residence, and permanence are met. To qualify for the reinvestment exemption, the new residence must meet the requirements of a primary residence and the reinvestment must be carried out within the legal timeframes.

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