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V2280-23 28 July 2023 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · exención por reinversión

Reinvestment exemption for construction may apply if work and investment deadlines are met

A taxpayer intends to sell their primary residence via a lease-purchase agreement to reinvest the proceeds into the construction of a new home. The Directorate General for Taxes (DGT) clarifies how capital gains are calculated and the requirements for the exemption to apply.

The question raised

Possibility of applying the exemption for reinvestment in the primary residence.

The DGT's ruling

To apply the exemption for reinvestment in the construction of a new dwelling, two conditions must be met: 1) applying the entirety of the amount obtained to the construction within a period of two years (prior or subsequent) to the sale, and 2) that the work is completed within a period not exceeding four years from the start of the investment. In the case of installment sales, the amount allocated to the purpose within the tax period in which it is received shall be considered reinvested. Only amounts allocated to construction in the two years prior to the date of transfer shall be considered reinvested amounts.

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