Owners must wait for tenant eviction to consider their property a primary residence

The application of the reinvestment exemption in Personal Income Tax (IRPF) requires that the sold property holds the status of primary residence. However, determining the exact moment a property acquires this classification can create uncertainty when a tenant is occupying the property.

What the DGT has ruled

The Dirección General de Tributos (DGT) has clarified that the status of primary residence is not acquired from the moment the owner files an eviction lawsuit against a tenant. According to the established criteria, for a property to be considered a primary residence, it must be effectively and permanently inhabited by the taxpayer.

In situations where the property is occupied by a tenant, the status of primary residence will only be achieved when the legal residence periods are met following the effective eviction of the tenant. The regulations require that the building be inhabited continuously for a period of at least three years to meet the requirements for the reinvestment exemption.

What this means for you

If you are the owner of a property that is currently rented and you wish to sell it to reinvest the proceeds into another main residence, you must take into account that the time of occupation by the tenant does not count as the owner's primary residence.

The calculation of the periods necessary for the exemption will only begin once the property is free of occupants and you move in to reside there effectively. This implies that the date of the lawsuit or the start of the eviction process does not serve to prove the status of primary residence before the Tax Administration.

What should be done

It is fundamental to verify compliance with the requirements established in the IRPF Law and its Regulations before proceeding with the sale of the property. Since the period of effective residence is a determining requirement to access the reinvestment exemption, it is necessary to confirm that the property has been permanently inhabited by the taxpayer during the period required by the law after regaining possession.

Each situation of eviction and subsequent occupation has temporal particularities that must be analyzed to avoid tax contingencies in the income tax return.