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V2044-20 22 June 2020 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · exención por reinversión

Reinvestment exemption may apply using sale proceeds to repay a mortgage on a previously purchased home

A taxpayer inquired whether mortgage repayments on a home purchased prior to the sale of a previous residence qualify as reinvestment. The DGT ruled that they do, provided the specific timeframes and requirements for the exemption are met.

The question raised

Until what date are the amortization installments of the mortgage loan encumbering the new primary residence considered as an investment in a new primary residence, for the purposes of applying the exemption for reinvestment in a primary residence regulated in Article 38.1 of the LIRPF.

The DGT's ruling

The exemption for reinvestment allows the amount obtained from the sale of the primary residence to be allocated to the amortization of the mortgage loan of a new residence acquired within the two years preceding or following the transfer. As money is a fungible asset, it is not necessary for the funds to be the same, but rather that the amount invested is equivalent to the amount obtained from the transfer. The exemption shall be total if the entire amount is reinvested, or partial if the amount invested is lower.

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