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V1591-19 27 June 2019 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · exención por reinversión

Capital gains may be exempt by reinvesting proceeds into paying down a new home mortgage

The inquirer asks how much must be reinvested in a new home to exempt the capital gain from selling a previous one, if the intention is to use the funds to reduce the new mortgage. The DGT rules that, where third-party financing is involved, the amount considered for the exemption is the transfer value minus the outstanding principal.

The question raised

Amount that should be reinvested in the new residence so that the entirety of the capital gain generated remains fully exempt.

The DGT's ruling

In order for the gain from the transfer of the primary residence to be exempt, the total amount obtained must be reinvested in the acquisition or renovation of a new primary residence. If external financing was used for the transferred residence, the total amount obtained is considered to be the transfer value minus the principal of the loan outstanding to be amortized. The reinvestment must be carried out within a period of two years prior to or following the date of disposal.

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