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Practical Income Manual 2021.

Concept of acquisition, construction, rehabilitation and expansion of the habitual residence

Concept of acquiring habitual residence

The acquisition of a habitual residence, for the purposes of the deduction, is understood to be the acquisition in the legal sense of the right of ownership or full ownership of the same, even if this is shared, the legal transaction that originates it being indifferent. Thus, the acquisition may be made by sale, exchange, inheritance, legacy or donation. Therefore, the acquisition of bare ownership, usufruct or other property rights of enjoyment over the habitual residence is excluded from the concept of acquisition valid for the application of the deduction.

The deduction for the acquisition of a habitual residence may be applied if the property had been legally acquired prior to January 1, 2013. That is, if prior to said date the contract (title) and the tradition or delivery of the home (mode) coincide.

Precisions :

  • In cases of marital annulment, divorce or judicial separation, the taxpayer may continue to take this deduction for the amounts paid in the tax period for the acquisition of what was their habitual residence during the term of the marriage, as long as they continue to have this condition for the common children and the parent in whose company they remain.

    You may also make a deduction for the amounts paid, if applicable, for the acquisition of the home that constitutes or will constitute your habitual residence, with the joint limit of 9,040 euros per year.

  • The right to apply the deduction for investment in a habitual residence is recognized even if one is not the owner of full ownership in cases in which the habitual residence was originally acquired in full ownership by the spouses pro undivided or for the conjugal partnership, and , constituting the habitual residence of both and their minor children, the dismemberment of the domain occurs, not voluntarily, but mortis causa due to the death of one of the spouses, and the residence continues to constitute the habitual residence of the family unit. See in this regard the Resolution of TEAC of May 8, 2014, Claim number 00/00990/2012 , relapse into extraordinary appeal for unification of criteria .

  • In the event of termination of a condominium over the habitual residence as of January 1, 2013, if one of the parties obtains 100 percent of the residence, they will have the right to apply 100 percent of the deduction for acquisition of habitual residence , up to a total of 9,040 euros of base, provided that said deduction had been applied in a year prior to 2013 in the percentage corresponding to their participation in the condominium.

    In this case, the application of the deduction by the acquired part until 100% of the full ownership of the property is completed will be limited to the amount that the community member who is no longer the owner of the property would have had the right to deduct from the date of termination of the condominium. if said extinction had not taken place. The deduction will also be conditional on the fact that the community member who ceases to be the owner has not exhausted the possibility of continuing to take the deduction for the acquisition of a habitual residence on the date of termination of the condominium. See in this regard the Resolution of the TEAC of October 1, 2020, Claim number 00/00561/2020 , relapse in appeal extraordinary appeal for unification of criteria .

"Construction of habitual residence":

Article 55 of the Personal Income Tax Regulations, in the wording in force on December 31, 2012, equated its "construction" with the acquisition of the habitual residence in cases in which the taxpayer had directly paid the expenses derived from the execution of the works, or had delivered amounts on account to the promoter of those, provided that the works were completed within a period of no more than four years from the beginning of the investment or, in the exceptional cases provided for in sections 3 and 4 of the aforementioned article 55 of the Regulation, an extension of said period was granted, which could not exceed, in any case, another four years.

This period with the extensions ended on March 19, 2021 since from March 14 to May 30 the calculation of the period was suspended in accordance with the provisions of Royal Decree-Law 11/2020.

However, taxpayers who have paid amounts for the construction of their habitual residence prior to January 1, 2013 and, once the works have been completed, have met the requirements for completion on time, occupation and effective and permanent residence provided for it, They will have the right to continue practicing the deduction, when they have used third-party financing.

Concept of rehabilitation of habitual residence

Regulations: Art. 55.5 Personal Income Tax Regulation

For the purposes of this type of deduction, rehabilitation of a habitual residence is considered to be the works carried out there that have met any of the following requirements:

  1. That the works have been qualified or declared as protected action in the field of housing rehabilitation , in the terms provided for in Royal Decree 1186/1998, of June 12, on financing measures for protected actions regarding housing and land in the 1998-2001 Plan ( BOE of 26); in Royal Decree 1/2002, of January 11, on financing measures for protected actions in housing and land of the 2001-2005 Plan ( BOE of 12); in Royal Decree 801/2005, of July 1, which approves the 2005-2008 State Plan, to promote citizens' access to housing, in Royal Decree 2066/2008, of December 12, by which regulates the State Housing and Rehabilitation Plan 2009-2012 ( BOE of 24)”; in Royal Decree 106/2018, of March 9, which regulates the State Housing Plan 2018-2021 ( BOE of 10).

  2. That the main purpose of the works is 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 of 25 percent of the acquisition price if the acquisition had been made 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.

Concept of expansion of the habitual residence

An extension of a habitual residence is understood to be the increase in its habitable surface , produced by enclosing an uncovered part or by any other means, permanently and during all times of the year. Thus, within this concept it is understood to include both the acquisition of an adjacent home and a home located on an immediately higher or lower level, in order to join it to the habitual home and thus increase its habitable surface.

Remember: The rehabilitation or expansion works of the habitual residence will give the right to the deduction when amounts for such concepts have been paid prior to January 1, 2013, provided that the works have also been completed before January 1, 2017.