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Practical manual for Income Tax 2021.

For acquisition or rehabilitation of the habitual residence in rural areas

Note: This deduction is NOT applicable to taxpayers who died before June 1, 2021.

Regulations: Art. 12 ter and Second Additional Provision of Law 8/2013, of November 21, of the Autonomous Community of Castilla-La Mancha, on Tax Measures.

Amount of deduction

15% of the amounts paid by the taxpayer during the tax period for the acquisition or rehabilitation of the home that constitutes or will constitute his habitual residence

Requirements for applying the deduction

To be eligible for the deduction, the following requirements must be met simultaneously:

  • That the home is located in one of the municipalities included in the sparsely populated areas referred to in article 12 of Law 2/2021, of May 7, on Economic, Social and Tax Measures against Depopulation and for the Development of the Rural Environment in Castilla-La Mancha, and that the population thereof is less than 5,000 inhabitants .

    According to article 12 of Law 2/2021, those groups of municipalities or population centres made up mainly of small municipalities, with a combined population density of less than 12.5 inhabitants per km2, high rates of ageing and intense population loss, with significant geographical isolation from municipalities with more than 30,000 inhabitants, a high percentage of land used for forestry, and a high significance of agricultural activity, will be classified as sparsely populated areas.

    Taking into account the degree of depopulation, the following categories of sparsely populated areas are established:

    a) Areas of intense depopulation : Those groups of municipalities with a density greater than 8 inhabitants per km2.

    b) Areas of extreme depopulation : Those groups of municipalities with a population density of less than 8 inhabitants per km2.

    Note: For the application of this deduction, the population of the municipalities will be taken as that which, according to their respective municipal register, they had on January 1 of each year.

    For the purposes indicated in the previous paragraph, population variations with respect to the 2021 municipal register that entail a reduction or non-application of the deductions that are applicable in accordance with it will not be taken into consideration. In such cases, these deductions may continue to be applied under the conditions and amounts that are appropriate according to the population of the aforementioned municipal register.

    List of sparsely populated areas

    See Decree 108/2021, of October 19, which determines the rural areas of Castilla-La Mancha , in accordance with the typology established in article 11 of Law 2/2021 of May 7, on Economic, Social and Tax Measures against Depopulation and for the Development of the Rural Environment in Castilla-La Mancha (BOCL 10-25-2021)

  • That the acquisition or rehabilitation of the home has occurred after January 1, 2021 .

  • The application of this deduction will require that the verified amount of the taxpayer's assets at the end of the tax period exceeds the value shown by its verification at the beginning of the same by at least the amount of the investments made, without taking into account the interest and other financing costs.

    For these purposes, increases or decreases in value experienced during the tax period by assets that at the end of the period continue to form part of the taxpayer's assets will not be computed.

Deduction base and maximum deduction base

  • Deduction base

    It will consist of the amounts paid for the acquisition or rehabilitation of the home, including the expenses incurred that have been borne by the purchaser.

    When the acquisition or rehabilitation is carried out with external financing, the deduction base will include amortization, interest, the cost of the instruments to cover the variable interest rate risk of mortgage loans regulated in article nineteen of Law 36/2003, of November 11, on Economic Reform Measures, and other expenses derived therefrom. In the event of application of the aforementioned hedging instruments, the interest paid by the taxpayer will be reduced by the amounts obtained from the application of the aforementioned instrument.

  • Total maximum deduction base

    a) For all the years in which the deduction is applied:

    It will be the lesser of:

    • 180,000 euros , or

      Note: In the case of homes purchased by several taxpayers, the amount of 180,000 euros refers to the home, so this amount must be distributed among the purchasers in proportion to the percentage of ownership they have in the home.

    • The amount of the acquisition or rehabilitation of the home that gives rise to the deduction, reduced by the amounts received from the Junta de Comunidades de Castilla-La Mancha in the form of subsidies for the acquisition or rehabilitation of the home.

    b) In each exercise :

    The maximum base to be applied in each fiscal year will be 12,000 euros .

    This maximum annual deduction base will be 12,000 euros for both individual and joint taxation. That is, in joint taxation, the maximum annual base (12,000 euros) is applied regardless of the number of members of the family unit who satisfy the amounts that give the right to apply the deduction.

    c) Other conditions

    • When a primary residence is acquired after having already enjoyed this same deduction , the total maximum base of the deduction will be reduced by the amounts invested in the acquisition of the previous residences, as long as said amounts had been subject to deduction.

    • When the sale of a habitual residence for which this deduction has been applied generates an exempt capital gain through reinvestment, the deduction base for the acquisition or rehabilitation of the new residence will be reduced by the amount of the capital gain to which the exemption for reinvestment is applied. In this case, no deduction may be made for the acquisition of the new one as long as the amounts invested in it do not exceed both the price of the previous one, to the extent that it has been subject to deduction, and the exempt capital gain from reinvestment.

    • In the cases of marital annulment, divorce or legal separation , the taxpayer may continue to apply this deduction, under the terms provided for in the state regulations on personal income tax, for the amounts paid in the tax period for the acquisition of what was the habitual residence during the marriage, provided that this condition continues to apply to the common children and the parent in whose company they remain.

Concepts that give the right to deduction

For the application of the deduction provided for in this article, the following concepts shall be taken into account:

  • Main residence

    As a general rule, the taxpayer's habitual residence is considered to be the building that constitutes his or her residence for a continuous period of at least three years. However, the dwelling will be deemed to have had a habitual residence status when, despite the aforementioned period not having elapsed, the taxpayer dies or other circumstances occur that necessarily require a change of address, such as a marriage, marital separation, job transfer, obtaining the first job, or change of employment, or other similar justified circumstances. For the dwelling to constitute the habitual residence of the taxpayer, it must be effectively and permanently inhabited by the taxpayer within a period of twelve months, counting from the date of acquisition or completion of the works. However, it will be understood that the dwelling does not lose its habitual character when the death of the taxpayer occurs or other circumstances occur that necessarily prevent the occupation of the dwelling, in the terms provided for in the previous paragraph. When the exceptions provided for in the two preceding paragraphs apply, the deduction for the acquisition of a home will be applied until the circumstances arise that necessarily require the change of home or prevent its occupation.

  • Acquisition of habitual residence

    The acquisition of a habitual residence shall be understood as the acquisition in the legal sense of the right of ownership or full ownership of the same, even if this is shared, regardless of the legal transaction that originates it.

  • Construction and expansion

    The construction or expansion of a home is considered to be the acquisition of a home, in the following terms:

    Housing extension: When the habitable surface area is increased by enclosing the uncovered part or by any other means, permanently and at all times of the year.

    Construction: When the taxpayer directly covers the expenses arising from the execution of the works, or delivers amounts on account to the promoter of the works, provided that the final certificate of work is issued within a period not exceeding four years from the start of the investment.

  • Rehabilitation works on the habitual residence

    Rehabilitation works on a habitual residence shall be considered to be those whose main objective is the reconstruction of the residence by consolidating and treating the structures, facades or roofs and other similar works, provided that the overall cost of the rehabilitation operations exceeds 25 percent 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, the market value of the residence at the time of said start. For these purposes, the proportional part corresponding to the land will be deducted from the purchase price or market value of the home.