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V2791-23 16 October 2023 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · exención por reinversión

Reinvestment exemption for primary residence can be applied using funds to repay a mortgage

A taxpayer has enquired whether the exemption for reinvestment in a primary residence can be applied by using the proceeds from the sale of an old home to repay the mortgage on a new home previously acquired. The Directorate General for Taxes (DGT) has confirmed that this is possible and that the reinvested amount is the acquisition value of the new home (based on the ownership percentage), regardless of whether the funds are used for mortgage repayment or as equity.

The question raised

Whether the exemption for reinvestment may be applied to the capital gain obtained and what is considered the reinvested amount.

The DGT's ruling

To qualify for the exemption, it is necessary to reinvest the total amount obtained in the acquisition or rehabilitation of a new primary residence within a period of two years prior to or following the transfer. The reinvested amount must be the acquisition value paid for the new residence according to the taxpayer's ownership percentage, and it is irrelevant whether the funds are used to repay a mortgage loan or for equity. Both the transferred and the acquired residence must have served as primary residences.

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