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V3091-20 15 October 2020 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · arras penitenciales

Penalties for breach of contract kept by the seller are not exempt via the primary residence sale relief

A taxpayer over 65 enquired whether earnest money (arras penitenciales) retained following the cancellation of a sale due to the buyer's fault is exempt from tax. The DGT ruled that since the transfer of the property did not take place, the exemption does not apply.

The question raised

It is asked whether said earnest money received and retained by the buyer is exempt from taxation pursuant to Article 33.4.b) of the Personal Income Tax Law.

The DGT's ruling

Amounts received as earnest money shall be classified as capital gains and attributed to the tax period in which they can be executed. As they do not derive from a transfer, this gain shall form part of the general income in the general tax base. The exemption for persons over 65 years of age is not applicable because the transfer of the primary residence has not occurred.

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