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V2227-23 27 July 2023 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · exención por reinversión

Reinvestment exemption for primary residence must be applied before the Ninth Transitional Provision reduction

A taxpayer inquired which tax benefit should be applied first when entitled to both the primary residence reinvestment exemption and the reduction under the Ninth Transitional Provision. The Directorate General of Taxes (DGT) ruled that the exempt portion due to reinvestment must be calculated first, and the corresponding reduction should then be applied to the remaining non-exempt gain.

The question raised

If a taxpayer is entitled to both the exemption for reinvestment in a primary residence and the reduction provided for in the ninth transitional provision of the Personal Income Tax Law, which of these tax benefits must be applied first.

The DGT's ruling

First, the exempt portion of the capital gain due to reinvestment in another primary residence must be calculated. Once that calculation has been performed, the reduction provided for in the ninth transitional provision must be calculated on the resulting non-exempt capital gain. To determine whether the 400,000 euro limit is reached, the portion of the transfer value that is subject to reinvestment shall not be taken into account.

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