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V1828-19 15 July 2019 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · actividad económica

Sale of developed land by a developer constitutes income from economic activities for Personal Income Tax (IRPF)

The applicant asks how to tax the sale of land intended for development. The Directorate General for Taxes (DGT) rules that, as part of real estate development activities, the sale of such land is classified as income from economic activities rather than a capital gain.

The question raised

Taxation under Personal Income Tax regarding the sale of developed land

The DGT's ruling

Real estate development for subsequent sale constitutes an economic activity as there is an organization of productive resources. In this case, the land has the nature of inventory and its sale generates income from economic activities integrated into the general tax base. The net income shall be determined by the direct estimation method. Urbanization costs are capitalized as part of the inventory value, and the income is recognized at the time of sale.

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