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V3088-20 15 October 2020 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · expropiación forzosa

Expropriation of a plot of land generates a capital gain or loss subject to Personal Income Tax

Property owners have sought guidance on how to tax the compensation received for the expropriation of a plot of land where their former home was located. The Directorate General for Taxes (DGT) has ruled that expropriation results in a capital gain or loss and that prior demolition costs may increase the acquisition value.

The question raised

Taxation of the amount received in the personal income tax return.

The DGT's ruling

Compulsory expropriation generates a capital gain or loss as it results in an alteration of the composition of the assets and a variation in their value. The acquisition value of the land shall include the actual purchase price, investments, improvements, and inherent expenses, and may include the demolition costs of the previous building. The change in assets must be attributed to the tax period in which the effective occupation of the property occurs. The result shall be integrated into the savings tax base.

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