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V3510-20 9 December 2020 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · actividad económica

Sale of developed land may be taxed as business income if classified as inventory

A query was raised regarding whether the sale of land should be taxed as business income or as a capital gain. The DGT indicates that if the land is classified as inventory, its sale generates income from business activities.

The question raised

Whether the income derived from the sale of the land must be taxed as income from economic activities or as capital gains and losses.

The DGT's ruling

Real estate development for sale constitutes an economic activity as there is an organization of productive means. If the land is considered inventory, its transfer generates income from economic activities that form part of the general taxable base. However, in compensation boards of a fiduciary nature, each case must be analyzed to determine whether the owners are carrying out an economic activity.

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