Age is a determining factor for the primary residence exemption in Personal Income Tax

Managing the capital gains derived from the sale of a primary residence is a critical aspect of the income tax return. Recently, the Dirección General de Tributos (DGT) has clarified an essential temporal requirement that can determine whether a taxpayer must pay tax on such a gain or if they can benefit from a tax exemption.

What the DGT has ruled

The inquiry focused on determining whether the exemption provided for in Article 33.4.b) of the Personal Income Tax Law (LIRPF) was applicable. The inquirer, who was 64 years old at the time of the sale, intended to avoid paying tax on the gain obtained.

The DGT has ruled that, to access this benefit, two conditions must mandatory be met:

• Age: Having reached 65 years of age on the exact date of the transfer of the property.
• Use of the residence: That the property has been the taxpayer's primary residence up to any day within the two years prior to the sale.

Since the minimum required age had not been reached at the time of the transaction, the administration establishes that the application of the exemption is not appropriate.

What this means for you

This criterion underscores that compliance with the requirements must be strict and verifiable at the time of the transfer. It is not enough to be close to retirement age or to have reached the age shortly after the sale; the regulations require that the taxpayer has already reached 65 years of age on the day the transfer is formalized.

For individuals, this implies that an error in the date of the transaction can result in an unexpected tax burden on the capital gain, as the benefit of the LIRPF cannot be applied.

What should be done

In an operation of this type, it is fundamental to analyze the exact date of the sale deed and compare it with the taxpayer's age. Given that tax regulations are rigorous regarding deadlines and age requirements, it is recommended to assess each particular situation to determine the tax impact of the sale and ensure that all provisions of Law 35/2006 are met.