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V1136-23 4 May 2023 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · exención por reinversión

Reinvestment exemption for construction requires completion within four years and payments within two-year periods

The taxpayer asks whether payments made for construction work both before and after the sale of their primary residence can be considered reinvested. The DGT rules that for the exemption to apply, the amount must be reinvested within the two years preceding or following the sale, and construction must be completed within a maximum of four years from the start of the investment.

The question raised

Question posed: Assuming that the sale of the current primary residence occurred two years after the start of the works, the completion of said works occurred one year after the sale, and a final payment for the works was made three months after its completion, for the purposes of applying the exemption for reinvestment in a primary residence, whether both the amounts paid for the works during the two years prior to the sale and the amounts paid in the fifteen months following could be considered reinvested amounts.

The DGT's ruling

To apply the exemption for reinvestment in the construction of a dwelling, two conditions must be met: 1) applying the entirety of the amount obtained from the sale to the construction within a two-year period (preceding or following the transfer); and 2) that the work is completed within a period not exceeding four years from the start of the investment. Payments made outside the two-year period relative to the date of the sale are not considered reinvested amounts.

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