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V2728-23 6 October 2023 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · exención por reinversión

Reinvestment exemption: only amounts used for acquiring or renovating a new home qualify

The taxpayer asks how much of the proceeds from the sale of their primary residence must be reinvested to qualify for the tax exemption if part of the funds is used for the new home and another part to settle personal debts. The DGT rules that amounts used to settle debts do not count towards the exemption, unless they pertain to the principal of the mortgage used to finance the property being sold.

The question raised

For the purposes of applying the reinvestment exemption, what amount must be subject to reinvestment so that the capital gain generated, if any, from the sale is exempt, taking into account that part of the amount obtained will be used for the acquisition and renovation of their new residence and another part for the cancellation of debts.

The DGT's ruling

For the gain to be exempt, the total amount obtained must be reinvested in the acquisition or rehabilitation of a new primary residence. If the works do not meet the requirements for rehabilitation (reconstruction of structures, facades, or roofs), only the amounts allocated to the acquisition shall be considered reinvested. In the event that external financing was used for the sold residence, the amount obtained is considered reduced by the principal of the loan pending amortization. If the reinvestment is less than the amount obtained, only the proportional part of the gain corresponding to the amount effectively invested shall be excluded.

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