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Form 100. Personal Income Tax Declaration 2021

8.2.6.1. Exemption for reinvestment in habitual residence

Capital gains arising from the transfer of the taxpayer's habitual residence may be exempt when the total amount of the transfer value is reinvested in the acquisition or rehabilitation of a new habitual residence.

Likewise, the taxpayer can obtain the tax benefit of the reinvestment exemption if he allocates the amounts obtained from the sale of the habitual residence to satisfy the price of a new habitual residence under construction, including the possibility of self-promotion.

In this case, for the reinvestment exemption to be applicable, the taxpayer will have to meet two deadlines: a period of two years to reinvest the amount obtained in the transfer and another period of four years to finish the construction from the beginning of the investment, acquiring ownership of the new home.

If external financing had been used to acquire the transferred home, the total amount obtained in the transfer will be considered, exclusively for these purposes, the value of the transfer less the principal of the loan pending amortization.

It will be understood that the taxpayer is transferring his habitual residence, when it constitutes his habitual residence at that time or had had such consideration until any day of the two years prior to the date of transfer. 

Concept of habitual residence and rehabilitation

For tax purposes, the building in which the taxpayer resides for a continuous period of at least three years is considered the taxpayer's habitual residence.

However, it will be understood that the residence had the character of habitual residence, when, despite said period not having elapsed, the death of the taxpayer occurs or other circumstances occur that necessarily require the change of address, such as celebration of marriage, separation marriage, job transfer, obtaining the first job or change of job or other justified analogues.

For its part, for the acquired home to constitute the taxpayer's habitual residence, it must be effectively and permanently inhabited by the taxpayer himself, within a period of twelve months, counted from the date of acquisition or completion. of the works.

For the purposes of the reinvestment exemption, the rehabilitation of the home is assimilated to the acquisition of a home, with such consideration being given to works on the home that meet any of the following requirements:

  1. That these are subsidized actions regarding housing rehabilitation in the terms provided for in Royal Decree 233/2013, of April 5, which regulates the State Plan to promote housing rentals, building rehabilitation, and urban regeneration and renewal, 2013-2016.

  2. That have as their main objective the reconstruction of the home through the consolidation and treatment of the structures, facades or roofs and other similar ones, provided that the overall cost of the rehabilitation operations exceeds 25% of the acquisition price if this had been carried out during the two years immediately prior to the start of the rehabilitation works or, otherwise, the market value of the home at the time of said start.

    For these purposes, the proportional part corresponding to the land will be deducted from the acquisition price or market value of the home.

Total or partial reinvestment

To apply the reinvestment exemption, it is not necessary to use in its entirety the money obtained from the sale of the previous home, and it is sufficient to apply money borrowed from a third party for the same purpose, either directly or as a consequence of subrogation in a loan previously contracted by the transferor of the property.

Therefore, to consider the reinvestment carried out, the entire acquisition value of the new home will be taken into account, regardless of whether the amount has been paid or financed. 

In the case of partial reinvestment, only the proportional part of the capital gain that corresponds to the amount actually invested will be excluded from taxation.

Reinvestment deadline

The reinvestment must be carried out, in one go or successively, in a period of no more than two years, counted from date to date, which may be not only those after but also those before the sale of the previous habitual residence.

It will be understood that the reinvestment is carried out within the deadline when the sale has been carried out in installments or with a deferred price, provided that the amount of the installments is used for the purpose indicated within the tax period in which they are received.

When, in accordance with the provisions of the previous paragraphs, the reinvestment is not carried out in the same year as the sale, the taxpayer will be obliged to state in the tax return for the year in which the capital gain is obtained his intention to reinvest under the conditions and deadlines indicated.

Due to the state of alarm declared as a result of the COVID-19 epidemic, the two-year period planned for reinvestment was paralyzed from March 14, 2020, the date of entry into force of Royal Decree 463/2020, until March 30. May 2020.

Likewise, the period provided for in article 41 bis.3 of the Personal Income Tax Regulations calculated from when the home ceased to be habitual until it is sold has also been affected by the aforementioned stoppage.

Breach of conditions.

Failure to comply with any of the conditions will determine the subjection to taxation of the corresponding part of the capital gain.

In such case, the taxpayer will allocate the part of the non-exempt capital gain one year after it was obtained, making a complementary declaration-settlement, including late payment interest, and it will be presented within the period between the date on which it occurs. non-compliance and the end of the regulatory declaration period corresponding to the tax period in which said non-compliance occurs