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Practical Income Manual 2021.

Principal Residence item

Regulations: Twenty-third Additional Provision Law Personal Income Tax and 41 bis Regulation. See also article 55.5 of the Personal Income Tax Regulations , in the wording in force as of December 31, 2012.

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.

In relation to the tax benefits related to the habitual residence, in the cases of acquisition of the property pro indiviso, the taxpayer having resided uninterruptedly in the residence since its acquisition, for the calculation of the three-year period to determine whether the property whether or not it is considered a habitual residence, it must be the date on which the acquisition of the undivided share occurred, without having any significance for these purposes on the date on which the remaining share was acquired until 100% of the ownership of the property was completed. the common property due to the division of the common property, the dissolution of the community property, the extinction of the marital economic regime of participation or the dissolution of communities of property or separation of community members. (Resolution of the TEAC of September 10, 2015, Claim number 00/06331/2013 , relapse in extraordinary appeal for unification of criteria).

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.

The regulatory expression "circumstances that necessarily require a change of address" makes said change mandatory. The term “necessarily” is an adverb so that, according to the Dictionary of the Royal Academy, it means with or by necessity or precision. In turn, the term “need” can indicate everything from which it is impossible to escape, lack or resist. The noun precision, included in the definition of “necessarily”, is even more illuminating, since it implies an indispensable obligation or need that forces and requires the execution of something. Finally, one of the definitions of “necessary” confirms the above: It is said about what is done and executed under the obligation of something else, as opposed to voluntary and spontaneous.

Consequently, its application requires considering whether, in a certain situation, changing domicile is an option for the taxpayer or is outside of their will or convenience; That is to say, the fact that one of the listed or other similar circumstances occurs is not decisive in itself, nor does it simply constitute an exception to the requirement of the general term of effective residence of three years. In the first case, that is, if the taxpayer maintains the possibility of choosing, there will not be a circumstance that allows the three-year period to be waived and, therefore, if the taxpayer decides to change address, not for This means that the home will be considered habitual. Along the same lines, it can be stated that if the concurrence of circumstances analogous to those listed in the twenty-third Additional Provision of Law Personal Income Tax is proven, the three-year period may be waived, provided that They also require a change of address.

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.

It will be understood that the acquired home does not lose its habitual character when the following circumstances occur:

  • When the death of the taxpayer occurs.

  • When other circumstances arise that necessarily prevent the occupation of the home in the terms provided above.

  • When the taxpayer enjoys a habitual residence due to position or employment and the acquired one is not used, in which case the period of twelve months will begin to be counted from the date of cessation.

When the home has been effectively and permanently inhabited by the taxpayer within a period of twelve months, counted from the date of acquisition or completion of the works, the three-year period to consider it as the taxpayer's habitual residence is will be computed from this last date .

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 for the promotion of housing rental, 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 percent 100 of the purchase price if it had been carried out during the two years immediately prior to the start of the rehabilitation works or, otherwise, of 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.

Likewise, the taxpayer can also 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 accordance with the doctrine established by Supreme Court Ruling no. 1098/2020, of July 23, 2020, relapsed into contentious-administrative appeal no. 1098/2020 (RED: STS 2698/2020) in the case of reinvestment in future construction, two requirements must be met for the reinvestment exemption to apply:

 1) That the entire amount received be applied to the construction of the new home, within the reinvestment period of two years.

 2) That the requirements of article 55 of the Personal Income Tax Regulations are met in the wording in force as of December 31, 2012, in accordance with the eighteenth transitional provision of the Law IRPF ##2##and the twelfth transitional provision of the IRPF Regulations. For which the completion of the works must be proven within a period of four years, except for the extension provided for in sections 3 and 4 of article 55 of the Personal Income Tax Regulations .

Note: For the exclusive purposes of applying the exemption, it will be understood that the taxpayer is transferring his or her habitual residence when it constitutes his or her habitual residence at that time or would have had such consideration until any day of the two years prior to the date of the transfer. .