EU residents cannot apply the reinvestment exemption if their home in Spain ceased to be their primary residence more than two years ago

The application of the reinvestment exemption for a primary residence for non-residents is a scenario that requires strict compliance with the timeframes established in current regulations. Recently, the Dirección General de Tributos (DGT) has delimited the scope of this tax benefit for those taxpayers residing in the European Union or the European Economic Area.

What the DGT has ruled

The query concerned the possibility of applying the reinvestment exemption for a primary residence in Form 210, following the sale of a property in Spain that had been the taxpayer's habitual residence, but which was used only occasionally during their stays in the country. The inquirer, a tax resident in France for five years, intended to reinvest the amount obtained in the acquisition of their new primary residence in French territory.

The DGT has determined that, for EU or EEA residents to qualify for this exemption, the building must have been their primary residence on any day within the two years prior to the date of the transfer. In the case analyzed, as five years had passed since the taxpayer established their residence in France, the requirement of habitual residence in the two-year period required by the regulations was not met.

What this means for you

If you are a resident in the EU or the EEA and own a property in Spain that was in the past your primary residence, you must take into account that the reinvestment tax benefit is not permanent. The regulations require continuity or temporal proximity between the use of the home as a primary residence and the moment of its sale.

The fact of using the home personally during short stays or holidays does not equate to maintaining the status of a primary residence for the purposes of the reinvestment exemption. If the property ceased to be your primary residence more than two years ago, the capital gain derived from the sale will be subject to the corresponding taxation under Non-Resident Income Tax (IRNR).

What you should do

It is necessary to verify the exact date on which the property in Spain lost its status as a primary residence. Before carrying out any transfer operation, it must be confirmed whether the timeframes provided in the TRLIRNR and the RIRPF are met to avoid tax contingencies. Each situation of international mobility must be analyzed to determine whether the use of the home in Spain allows for maintaining the right to the exemption or if, on the contrary, the transfer will generate an immediate tax obligation.