Signing a deposit agreement does not allow for the application of the reinvestment exemption

Individuals who sell their primary residence and intend to apply the reinvestment exemption for Personal Income Tax (IRPF) must be cautious regarding deadlines and the nature of the contracts signed. Formalizing a commitment to purchase is not sufficient to meet the legal requirement for reinvestment.

What the DGT has ruled

The Dirección General de Tributos (DGT) has determined that the acquisition of a home must be understood in a legal sense, in accordance with the provisions of the Civil Code. In this context, the delivery of the property or the execution of a public deed are the elements that validate the acquisition.

The criteria establish that a deposit agreement (contrato de arras) is not synonymous with acquisition, as this document does not transfer ownership on its own without the delivery of the property. Therefore, if the effective acquisition does not occur within the two-year period stipulated by the regulations, the taxpayer loses the right to the reinvestment exemption.

What this means for you

If you have sold your primary residence and signed a deposit agreement with the intention of reinvesting the amount into a new residence, you should know that the two-year period begins from the transfer of the sold home. If the actual acquisition of the new home has not been formalized by the end of said period, the applied exemption will be deemed improper.

The applicable regulations, set out in the IRPF Law and its Regulations, require that the reinvestment be effective. Failure to meet this requirement entails the obligation to regularize the tax situation before the Administration.

What you should do

In the event that the two-year period expires without the acquisition of the new home having been perfected, the taxpayer must take the following actions:

• File a supplementary tax return for the fiscal year in which the capital gain was obtained.
• Include the gain that was initially considered exempt in the IRPF taxable base.
• Pay the corresponding late payment interest for the delay in tax payment.

It is essential to verify that the purchase and sale operation is completed within the legal timeframes to avoid sanctions or requests from the Tax Agency. Each reinvestment situation must be analyzed to ensure compliance with the requirements of Law 35/2006.