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V0558-22 18 March 2022 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · promoción de edificaciones

Property development via commercial premises renovation classified as economic activity rather than capital gains

A property owner renovates a commercial premises to construct and sell two dwellings. The DGT has ruled that this constitutes an economic activity; therefore, the sale generates income from economic activities instead of capital gains.

The question raised

Taxation of the operation under Personal Income Tax.

The DGT's ruling

Building promotion is an economic activity if there is an organization of means to produce or distribute goods, as occurs when allocating dwellings for sale. Dwellings are considered inventory and their transfer generates income from economic activities. The net income shall be determined under the direct estimation regime. Income is imputed in the period in which the sale accrues, unless the cash basis is opted for.

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