Purchase costs of a new home may be included in the reinvestment exemption

Managing the capital gains derived from the sale of a primary residence requires a precise calculation of the amount to be reinvested. A recent resolution from the Dirección General de Tributos (DGT) has clarified the scope of this concept, allowing for greater optimization of the exemption in Personal Income Tax (IRPF).

What the DGT has ruled

The inquiry addresses whether the expenses derived from the acquisition of a new home can be integrated into the reinvested amount for the application of the exemption. The DGT's criteria determine that the reinvested amount is not limited exclusively to the purchase price of the property, but also includes all expenses inherent to its acquisition.

These concepts include:

• Transfer Tax (ITP) or VAT, as applicable.
• Notary fees.
• Management fees.
• Property Registry registration costs.

The regulations establish that these expenses must be satisfied within a period of two years, whether before or after the transfer of the primary residence that gives rise to the exemption.

What this means for you

For individuals selling their primary residence and acquiring another, this interpretation provides an advantage in reducing the taxable base. By being able to include acquisition costs (taxes, notary, registry, etc.) within the reinvested amount, the total volume of the reinvestment increases. This allows a larger portion of the capital gain to remain exempt from taxation, provided that the requirements of the IRPF Law and its Regulations are met.

It is important to highlight that this treatment is applicable regardless of the financing method used, whether through own funds or through mortgage or personal loans.

What you should do

In an operation of this type, it is necessary to maintain rigorous tracking of all invoices and proof of payment related to the new acquisition. To ensure the correct application of the exemption, it must be verified that all included expenses form part of the acquisition value according to current regulations and that they were accrued within the established legal timeframes.