Personal Income Tax exemption for those over 65: limits on segregated plots

The Dirección General de Tributos (DGT) has issued a relevant ruling regarding the application of the exemption in Personal Income Tax (IRPF) for individuals over 65 in situations involving the segregation of plots.

What the DGT has ruled

The query concerned the possibility of applying the exemption provided for in Article 33.4.b) of the Personal Income Tax Law following the segregation of a plot. The body has ruled that the segregation of a plot does not alter its value or its original acquisition date.

However, the ruling establishes that the exemption for those over 65 is strictly applicable only to the plot that holds the status of primary residence at the time of the transfer, or that has been so in the two years prior to the sale. Therefore, if after segregation a plot is created intended exclusively for other purposes, it cannot benefit from the exemption, meaning the capital gain derived from its sale must be taxed in the savings tax base.

What this means for you

This ruling directly affects individuals over 65 who own properties that have been subject to division or segregation processes. If you plan to sell a part of a plot that was previously part of your primary residence, you must take into account that the status of primary residence is an essential and specific requirement for each resulting registry unit or plot.

If the segregated plot lacks the status of a primary residence, the gain obtained from its disposal will not be exempt, regardless of the taxpayer's age or whether the main plot does enjoy said benefit.

What you should do

In the event of a segregation operation or the sale of plots resulting from a division, it is necessary to:

• Verify the classification of each of the resulting plots regarding its use as a primary residence.
• Analyze the tax impact of the capital gain on the plots that do not meet the residency requirement.
• Assess each particular situation in accordance with current IRPF regulations.