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V1874-23 28 June 2023 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · exención por reinversión

Construction reinvestment exemption requires completion within four years of investment commencement

The taxpayer inquired whether they could apply for the reinvestment exemption for the construction of their new primary residence following the sale of their previous one. The Directorate-General for Taxes (DGT) ruled that, in accordance with Supreme Court case law, construction must be completed within four years from the start of the investment to be treated as an acquisition.

The question raised

Possibility of applying the exemption for reinvestment in the primary residence for Personal Income Tax purposes.

The DGT's ruling

To apply the exemption for reinvestment in the construction of a dwelling, two conditions must be met: 1) the entire amount obtained from the sale of the dwelling prior to the construction of the new one must be applied within a period of two years (prior to or following the sale); and 2) the construction must be completed within a period not exceeding four years from the start of the investment. Construction is assimilated to acquisition provided that these time limits are met and ownership is acquired. It is not necessary that the funds used are specifically those obtained from the sale, as loans or own funds may be used.

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