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V1382-18 28 May 2018 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · expropiación forzosa

Gains from increased expropriation compensation are taxable once the judgment becomes final

A taxpayer has requested clarification regarding the classification and timing of taxation for an increase in the compensation (justiprecio) for their primary residence due to expropriation, including interest. The DGT indicates that the gain is imputed when the judgment becomes final and analyses the reinvestment exemption and the nature of the interest.

The question raised

Classification, temporal imputation, application of the reinvestment exemption, and taxation of late payment interest.

The DGT's ruling

The increase in the fair compensation for expropriation is a capital gain that is imputed to the tax period in which the judicial resolution becomes final. To apply the exemption for reinvestment in the primary residence, both properties must meet the requirements for habitual residence. Late payment interest, being compensatory in nature, is taxed as a capital gain, and the change in assets occurs when the amount is quantified and its payment is agreed upon.

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