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V2974-20 2 October 2020 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · exención por reinversión

Reinvestment exemption may apply if property renovation meets specific requirements

A taxpayer inquired whether the exemption for reinvesting proceeds from the sale of a primary residence could apply if part of the funds is used to renovate an inherited property. The Directorate General for Taxes (DGT) clarified that such renovation only qualifies if it focuses on structural elements and exceeds a specific cost threshold.

The question raised

Application of the exemption for reinvestment in a primary residence to the capital gain obtained from the sale of one's former primary residence.

The DGT's ruling

For rehabilitation to be assimilated with the acquisition of a dwelling, the works must have as their primary objective reconstruction through the consolidation and treatment of structures, facades, roofs, or other analogous elements. Works involving readaptation, redistribution, or the improvement of installations such as electricity or carpentry are not included. Furthermore, the global cost must exceed 25 percent of the acquisition price or market value of the building. The classification of the works as rehabilitation is a matter of fact that must be substantiated with means of proof.

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