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V0709-23 23 March 2023 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · exención por reinversión

Reinvestment exemption cannot be applied if the sold property was not the primary residence in the two years prior to sale

The taxpayer inquired whether they could apply the reinvestment exemption by using proceeds from the sale of a former property to pay off the mortgage on their current primary residence. The Directorate General for Taxes (DGT) ruled that this is not possible because the sold property ceased to be their primary residence in 2015, thus failing to meet the requirement of having been the primary residence during the two years preceding the transfer.

The question raised

Whether, in the event of allocating the sale proceeds to pay off the mortgage on their current habitual residence, they may apply the reinvestment exemption.

The DGT's ruling

To apply the reinvestment exemption, the transferred property must be the taxpayer's habitual residence at the time of sale or must have been so on any day during the two years prior to the transfer. In this case, as they ceased residing in the property in 2015, the requirement of habitual residence required by Article 41 bis of the RIRPF is not met. Therefore, the exemption under Article 38.1 of the IRPF Law is not applicable.

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