Reinvestment exemption requires full ownership of the property

The application of the reinvestment exemption in Personal Income Tax (IRPF) is a mechanism designed to facilitate residential mobility. However, the nature of the acquired property determines whether the taxpayer can benefit from this tax relief.

What the DGT has ruled

The Dirección General de Tributos (DGT) has addressed the possibility of applying the reinvestment exemption to the amount intended for the acquisition of the bare ownership of a property. The criteria establish that tax benefits linked to the primary residence are strictly tied to full ownership, regardless of whether this is shared or individual.

In this sense, the ruling determines that if a taxpayer acquires only the bare ownership and not the full ownership, they do not meet the legal requirement necessary for the exemption. The regulations require that the reinvestment be carried out through the acquisition or renovation of a new primary residence within a two-year period, but under the condition of holding complete ownership of the property.

What this means for you

If you are an individual selling your primary residence with the intention of reinvesting the amount in a new residence, you must take special care with the legal structure of the purchase. The exemption is not applicable if the operation consists of the acquisition of bare ownership, as the right of use and enjoyment (usufruct) is not part of the full ownership required by law.

This scenario directly affects those who carry out purchase and sale operations involving usufruct or family agreements that do not transfer all rights over the property. The lack of full ownership invalidates the application of the exemption on the portion of the amount intended for said acquisition.

What you should do

In a residential mobility operation, it is fundamental to verify that the new acquisition guarantees full ownership to avoid losing the tax benefit. It is recommended to:

• Analyze the legal nature of the acquisition before formalizing the purchase.
• Confirm that the operation complies with the requirements of Law 35/2006 and RD 439/2007.
• Assess each particular situation to ensure that the purchase structure allows for the reinvestment exemption.