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V2519-18 18 September 2018 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · exención por reinversión

Reinvestment exemption does not apply if funds are used to extend an existing property

A taxpayer inquired whether the reinvestment exemption could be applied when using proceeds from a property sale to convert a barn and extend their current home. The Directorate General for Taxes (DGT) ruled that the exemption is not applicable in cases of property extension.

The question raised

Possibility of applying the exemption for reinvestment in a habitual residence to the capital gain obtained.

The DGT's ruling

To apply the exemption, the transferred property must be the habitual residence and the amount must be reinvested in the acquisition or rehabilitation of a new habitual residence. The exemption is limited to legal acquisition or rehabilitation, excluding cases involving the expansion of a property already owned by the taxpayer. In this case, as the funds are intended for the expansion of the surface area of an existing property, the exemption is not applicable.

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