3. Exemptions on capital gains

Donations to certain entities

Regulations: Art. 33.4 a) Law Income Tax

Capital gains that arise from donations made to the entities mentioned in article 68.3 of the Personal Income Tax Law are exempt.

The entities referred to in article 68.3 of the Personal Income Tax Law are those that give the right to practice the deduction for donations. These entities benefiting from patronage are listed in Chapter 16.

Transfer of their habitual residence by persons over 65 years of age or persons in a dependent situation

Regulations: Articles 33.4 b) Law IRPF and 41 bis Regulation IRPF

Capital gains that arise from the transfer of their habitual residence by persons over 65 years of age, as well as by persons who are in a situation of severe or high dependency in accordance with the Law on the promotion of personal autonomy and care for persons in situations of dependency, are exempt. The exemption also applies to the transfer of the bare ownership of the habitual residence by its owner, who reserves the life usufruct over said residence.

Regarding the concept of housing , see the twenty-third Additional Provision of the Personal Income Tax Law and article 41 bis of the Personal Income Tax Regulations .

For the exclusive purposes of applying this exemption, it will be understood that the taxpayer is transferring his or her habitual residence when said building constitutes his or her habitual residence at that time or had been considered as such until any day of the two years prior to the date of transfer.

Please note the interpretative criteria established by the Supreme Court in its ruling No. 553/2023, of May 5, filed in administrative appeal no. 7851/2021 ( ROJ : STS 2021/2023), according to which "in situations of separation, divorce or annulment of marriage that have determined the cessation of effective occupation as a habitual residence for the spouse who has to leave the habitual residence for such reasons, the requirement of effective occupation of the habitual residence at the time of the transfer or on any day of the two years prior to it, required by section 3 of art. 41 bis of the IRPF Regulation , will be deemed to be fulfilled when such situation occurs in the spouse who remained there". Therefore, and for the exclusive purposes of applying the exemptions provided for in articles 33.4. b) and 38 of the Law of the Personal Income Tax , it will be understood that the taxpayer who had to abandon the family home due to the attribution of the use to the other spouse, is transferring the home when, for the spouse who remained in it, it constitutes his or her home at that time or would have been considered as such until any day of the two years prior to the date of transfer.

Note: the non-subject to IRPF of the amounts received in certain cases of reverse mortgage of the habitual residence is discussed in the subsection " Non-taxable income ", of this same Chapter.

Payment of tax debts with assets that are part of the Spanish Historical Heritage

Regulations: Art. 33.4 c) Law Income Tax

Capital gains that arise from the payment of tax debts of Personal Income Tax and the Inheritance and Gift Tax through the delivery of assets that are part of the Spanish Historical Heritage are exempt in accordance with the provisions of article 73 of Law 16/1985, of June 25, on the Spanish Historical Heritage.

Dation in payment for the principal residence

Regulations: Art. 33.4 d) Law Income

Capital gains that arise from the payment in lieu of the habitual residence of the debtor or guarantor of the debtor are exempt, for the cancellation of debts secured by a mortgage on the same, contracted with credit institutions or any other entity that, in a professional manner, carries out the activity of granting mortgage loans or credits.

Precision: The payment in kind is not denatured nor does its nature change because it is made in favor of a third party, other than the mortgage creditor, provided that it is the latter who imposes such a condition to access the payment in kind and accepts it as extinguishing the obligation.

Likewise, capital gains that are revealed on the occasion of the transfer of the home in which the same requirements are met as for the previous payment in kind, carried out in judicial or notarial foreclosures, are declared exempt. .

In any case, the owner of the main residence must not have other goods or rights that could satisfy the total amount of the debt and prevent the alienation of the property.

Regarding the concept of habitual residence, see the Twenty-Third Additional Provision of the Personal Income Tax Law and Article 41 bis of the Regulations.

Exemption for reinvestment in primary residence

Regulations: Articles 38.1 Law IRPF and 41 Regulation IRPF

Capital gains obtained from the transfer of a primary residence are exempt, provided that the amount obtained is reinvested in the acquisition of another primary residence or in the rehabilitation of one that will have such character, under the conditions and requirements established by regulation, in the same year in which the capital gain is obtained, in the two previous years or in the two following years.

The conditions and requirements for the application of this exemption for reinvestment in primary residence are discussed in Chapter 11.

Exemption for reinvestment in another newly or recently created entity

Regulations: Articles 38.2 Law IRPF and 41 Regulation IRPF

Capital gains obtained from the transfer of shares or interests for which the deduction for investment in newly or recently created companies provided for in article 68.1 of this Law has been applied are exempt, provided that the total amount obtained from the transfer of the same is reinvested in the acquisition of shares or interests in the aforementioned entities under the conditions determined by regulation.

The conditions and requirements for the application of this exemption for reinvestment in another newly or recently created entity are discussed in Chapter 11.

Exemption for reinvestment in life annuities

Regulations: Articles 38.3 Law IRPF and 42 Regulation IRPF

Capital gains arising from the transfer of assets by taxpayers over 65 years of age are exempt, provided that the total amount obtained from the transfer is used within six months to create an insured life annuity in their favour, under the conditions established by regulation. The total maximum amount that can be allocated for this purpose to constitute life annuities will be 240,000 euros. It should be noted that this investment limit is per taxpayer, not per transaction.

When the reinvested amount is lower than the total of the amount received in the transfer, only the proportional part of the capital gain obtained corresponding to the reinvested amount will be excluded from taxation.

The advanced receipt, total or partial, of the economic rights deriving from the constituted life annuity will determine the subjection to taxation of the corresponding capital gain.

The treatment of income derived from life annuities has no particularities, being taxed as income from movable capital.

The detailed commentary on this exemption for the transfer of assets by taxpayers over 65 years of age with reinvestment of the amount obtained in life annuities is contained in Chapter 11.

Transfer of shares or interests in newly created or recently created companies acquired between July 11, 2011 and September 29, 2013

Regulations: See the thirty-fourth Additional Provision of the Personal Income Tax Law , in its version in force on December 31, 2012.

Capital gains arising from the transfer of shares or interests acquired by the taxpayer in newly or recently created companies between July 11, 2011 and September 29, 2013 are exempt, provided that they have remained in the taxpayer's assets for a period of more than three years (counted from date to date) since their acquisition, and the requirements and conditions established in the Thirty-fourth Additional Provision of the Income Tax Law are met in its version in force on December 31, 2012.

Exceptional aid for personal injuries caused by natural disasters

The following are exempt: aid granted in the event of death or disability caused directly by the storm "Filomena", in accordance with the provisions of Royal Decree-Law 10/2021, of May 18 ( BOE of May 19), as well as aid granted for personal injury directly caused by volcanic eruptions on the island of La Palma in accordance with the provisions of Royal Decree-Law 20/2021, of October 5, which adopts urgent support measures for the repair of the damage caused by volcanic eruptions and for the economic and social reconstruction of the island of La Palma ( BOE of October 6).

Also, with effect from December 28 2022, the aid provided for in Law 17/2015, of July 9, of the National Civil Protection System, for personal injuries caused by forest fires that took place during the months of June, July and in the Autonomous Communities that are declared areas seriously affected by civil protection emergencies (Andalusia, Aragon, Balearic Islands, Canary Islands, Castilla y León, Castilla-La Mancha, Catalonia, Valencian Community, Extremadura, Galicia, Madrid, Region of Murcia, Navarra, Basque Country and La Rioja), in the annex of the Agreement of the Council of Ministers of August 23, 2022, all in accordance with the provisions of section 7 of article 94 of Royal Decree-Law 20/2022, of December 27, on measures to respond to the economic and social consequences of the War in Ukraine and to support to the reconstruction of the island of La Palma and other vulnerable situations ( BOE of December 28).

Exceptional aid for damage to heritage elements caused by natural disasters

Regulations: Additional Provision fifth.1 section c) Law IRPF

Public aid aimed at repairing the destruction of heritage elements due to fire, flooding, subsidence, volcanic eruption or other natural causes will not be included in the tax base of IRPF .

In this regard, take into account the aid intended to alleviate personal damage, housing, industrial, commercial and service establishments, local corporations, and natural or legal persons, provided for in Royal Decree-Law 20/2021, of October 5, by which urgent support measures are adopted for the repair of damage caused by volcanic eruptions and for the economic and social reconstruction of the island of La Palma ( BOE of October 6).

Aid to offset costs in buildings affected by the release of the first digital dividend

Regulations: Additional Provision 5.4 Law IRPF

The aid granted pursuant to the provisions of Royal Decree 920/2014, of October 31, which regulates the direct granting of subsidies intended to offset the costs derived the reception or access to television audiovisual communication services in buildings affected by the release the digital dividend (first digital dividend), will not be included in the taxable base of ##1## IRPF ##1## .

Attention: Unlike the previous one, the aid to compensate the costs derived from the reception or access to television audiovisual communication services in buildings affected by the release of the second digital dividend, regulated by Royal Decree 392/2019, of June 21, is subject to and not exempt from tax.

Grants and aid for energy rehabilitation actions in buildings

Regulations: Additional Provision 5.4 Law IRPF

The aid granted under the different programs established in the following Royal Decrees will not be included in the taxable base of IRPF in the 2021 and subsequent years:

• Royal Decree 691/2021, of August 3, regulating the subsidies to be granted for energy rehabilitation actions in existing buildings, in execution of the Energy rehabilitation program for existing buildings in municipalities with a demographic challenge (PREE 5000 Program), included in the Regeneration and demographic challenge Program of the Urban rehabilitation and regeneration Plan of the Recovery, Transformation and Resilience Plan, as well as its direct granting to the autonomous communities;

• Royal Decree 737/2020, of August 4, regulating the aid program for energy rehabilitation actions in existing buildings and regulating the direct granting of aid from this program to the autonomous communities and cities of Ceuta and Melilla;

• Royal Decree 853/2021, of October 5, regulating the assistance programs for residential rehabilitation and social housing of the Recovery, Transformation and Resilience Plan.

• Royal Decree 477/2021, of June 29, approving the direct granting to the autonomous communities and the cities of Ceuta and Melilla of aid for the execution of various incentive programs linked to self-consumption and storage, with renewable energy sources, as well as the implementation of renewable energy thermal systems in the residential sector, within the framework of the Recovery, Transformation and Resilience Plan.

Transfer of urban properties acquired between May 12, 2012 and December 31, 2012

Regulations: Additional Provision Thirty-Seventh Law IRPF

of the capital gains that arise from the transfer of urban properties acquired for a fee from May 12, 2012 to December 31, 2012 are exempt.

This assumption is discussed under exempt capital gains in Chapter 11.

Income obtained by the debtor in bankruptcy proceedings

Regulations: Additional Provision forty-third Law IRPF

The income obtained by debtors that is revealed as a result of debt reductions and payments in payment, established in:

• An agreement judicially approved in accordance with the procedure established in Law 22/2003, of July 9, on Bankruptcy and, since September 1, 2020, in Royal Legislative Decree 1/2020, of May 5, which approves the revised text of the Bankruptcy Law.

• A judicially approved refinancing agreement referred to in article 71 bis and the fourth Additional Provision of Law 22/2003, of July 9, Bankruptcy and, since September 1, 2020, regulated in Title II of the second book, articles 596 to 630, of Royal Legislative Decree 1/2020, of May 5, which approves the revised text of the Bankruptcy Law.

• An out-of-court payment agreement referred to in Title X of Law 22/2003, of July 9, Bankruptcy and, since September 1, 2020, regulated in Title III of the second book, articles 631 to 694, of Royal Legislative Decree 1/2020, of May 5, approving the revised text of the Bankruptcy Law, or

• Finally, as a consequence of the exonerations of unsatisfied liabilities referred to in article 178 bis of Law 22/2003, of July 9, on Bankruptcy and, since September 1, 2020, Chapter II of Title XI of the first book, articles 486 to 502, of Royal Legislative Decree 1/2020, of May 5, which approves the revised text of the Bankruptcy Law.

In all cases, it is a necessary requirement for income to be declared exempt that the debts do not derive from the exercise of economic activities .

Regarding the imputation criteria in the case of losses arising from overdue and unpaid credits when a reduction established in a judicially approved refinancing agreement or in an out-of-court payment agreement becomes effective, see article 14.2.k) of the Tax Law.