Other requirements and conditions for the application of the exemption

A. Total or partial reinvestment

The reinvestment of the amount obtained from the transfer in the acquisition of a new home may be total or partial.

To apply the exemption for reinvestment, it is not necessary to use all the money obtained from the sale of the previous home, it being sufficient to apply for the same purpose money borrowed from a third party, either directly or as a result of subrogation in a loan previously contracted by the transferor of the property. Therefore, in order to consider the reinvestment to have been made, the entire acquisition value of the new home will be taken into account, regardless of whether its amount has been paid or financed, and if the acquisition value of the new home is equal to or greater than that of the old home, the reinvestment will be total. Otherwise, it will be partial (Supreme Court ruling no. 1230/2020, of October 1, 2020, issued in administrative appeal no. 809/2019 -ROJ STS 3049/2020-).

When the amount of the reinvestment is less than the total amount obtained from the transfer, only the portion of the capital gain corresponding to the amount effectively reinvested is excluded from the tax, under the conditions outlined previously.

Please note that in the case of partial reinvestment, the proportional part of the capital gain obtained will be excluded from taxation, once the exemption provided for in the Thirty-seventh Additional Provision of the Personal Income Tax Law has been applied, applicable ( % exemption on capital gains obtained from the transfer of property acquired between 12 May 2012 and 31 December 2012), which corresponds to the amount reinvested, under the terms and conditions provided for the exemption for reinvestment in primary residence.

B. Reinvestment Period

The reinvestment of the amount obtained from the sale must be carried out, in one go or , over a period of no more than two years, counted from date to date, which may be only subsequent but also to the sale of the previous habitual residence.

The reinvestment to which this exemption is conditioned does not entail investing in the new home exactly the money obtained specifically and directly from the transfer of the former habitual residence, (..). What the Personal Income Tax regulations seek to benefit through this exemption is that the taxpayer invests within two years, prior or after the sale, an amount equivalent to the total amount obtained from the transfer, which would give rise to a total exemption of the gain, or where appropriate, a partial exemption in proportion to the amounts reinvested within said two-year period. Resolution of the extraordinary appeal for the unification of criteria of the TEAC dated September 11, 2014, Claim number 00/02463/2013 , issued in an extraordinary appeal for the unification of criteria.

The reinvestment is not made after the deadline if the sale was made in instalments or at a deferred price, provided that the amount of the instalments is used for the stated purpose within the tax period in which they are received.

C. Option to apply the exemption

In relation to the specific method or form through which the option for the reinvestment exemption must be expressed, the following situations must be distinguished:

1. Reinvestment produced in the same year in which the capital gain is obtained or in the two previous years . In this case, no formal obligation is required in relation to the option for exemption, provided that the application of the same is not denied by any other circumstance in the declaration of the same fiscal year or of the following ones.

2. Reinvestment produced in the following two fiscal years . When the taxpayer intends to reinvest in the following two years, he/she must state in the declaration for the year in which he/she obtains the capital gain his/her intention to reinvest under the conditions and time limits established by regulation, completing section F2 and the corresponding section of Annex C.1 for additional information in the declaration form.

Completion of the corresponding section of Annex C.1, which is a formal obligation, is not, however, of a substantial or obligatory nature in order to apply the exemption for reinvestment, provided that the application of the exemption is not refuted by any other circumstance in the declaration for the same or subsequent fiscal years.

See in this regard the Resolution of the TEAC of September 8, 2016, Claim number 00/06371/2015 , issued in an extraordinary appeal for unification of criteria.

D. Non-compliance with reinvestment conditions

Failure to comply with any of the reinvestment conditions will result in the taxation of the corresponding portion of the capital gain.

In such case, the taxpayer must allocate the non-exempt portion of the capital gain to the year in which it was obtained, by carrying out a supplementary self-assessment including late payment interest.

This last declaration must be submitted within the period between the date on which the breach occurs and the end of the regulatory declaration period corresponding to the tax period in which said breach occurs.

A careful distinction must be made between whether the breach affects the reinvestment period or the reinvested amount. In the latter case, the right to exemption from the capital gain obtained corresponding to the reinvested amount is not lost.