Donors of land with buildings may include construction costs in the acquisition value

When making a donation of plots of land that include buildings, doubts arise regarding how to determine the acquisition value for calculating capital gains in Personal Income Tax (IRPF). A recent resolution from the Directorate General of Taxes (DGT) provides clarity on the integration of construction costs into said value.

What the DGT has resolved

The tax authority has confirmed that the transfer value in donations must comply with the rules of Inheritance and Gift Tax, without exceeding the market value. In this context, the acquisition value of the plot is not limited solely to the cost of the land, but must include:

• The original amount of the plots of land.
• The cost of the construction works carried out.
• The expenses and taxes inherent to the building, excluding interest.

Regarding timing, the DGT indicates that the acquisition date of the building shall be the date the works were completed. If such a date cannot be proven, the date recorded in the deed of declaration of new construction will be used.

What this means for you

If you are an individual who has built a home on a plot of land and decides to donate the entire property, you have the possibility of increasing the acquisition value by including the amount invested in construction. By raising this value, the difference between the transfer value and the acquisition value is reduced, which directly impacts the amount of capital gains subject to taxation in IRPF.

What you should do

For this criterion to be applicable, it is essential to have valid means of proof that certify both the cost of the works and the exact date on which they were completed. A lack of documentation supporting the investment or the moment of construction completion could prevent the inclusion of these costs or force the use of less favorable dates, such as the date of the new construction deed.