No Personal Income Tax (IRPF) on the free transfer of roads to the City Council

The Directorate General of Taxes (DGT) has issued a relevant ruling regarding taxation in Personal Income Tax (IRPF) when the free transfer of land intended for roads in favor of the local administration occurs.

What the DGT has ruled

The inquiry analyzes whether the delivery of land for the creation of public roads, carried out as part of urban planning obligations, should be considered a transfer that generates a capital gain or loss. The DGT establishes that these mandatory transfers of land to City Councils constitute urban planning burdens inherent to the urban development process.

In the analyzed case, upon accepting an inheritance and the immediate transfer of the land to comply with urban planning regulations, there is no real alteration in the composition of the taxpayer's assets. Consequently, as there is no effective increase in assets, no capital gain or loss is generated as provided for in Article 33 of the IRPF Law.

What this means for you

This criterion has a direct impact on individuals who, after receiving assets through inheritance or carrying out land subdivision processes, are obliged to transfer part of their property to the public administration for the execution of infrastructure or communication routes. If the transfer is a mandatory urban planning burden and occurs immediately upon the acquisition of the asset, the taxpayer should not declare said delivery as a taxable operation in their income tax return.

What you should do

In situations involving urban development or inheritances that involve the delivery of land to local entities, it is necessary to:

• Verify that the transfer of the roads responds to an enforceable urban planning obligation.
• Check the chronology of the transfer to ensure that the handover occurs within the framework of the urban planning burden.
• Assess each particular situation with a specialist to confirm that the requirements of Law 35/2006 are met and to avoid errors in the tax settlement.