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Practical Guide to Income Tax 2025. Part 1.

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 Law of the PIT (50% exemption on capital gains obtained from the transfer of real estate acquired between May 12, 2012, and December 31, 2012), corresponding 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.

Criteria for determining the date of home acquisition (reinvestment) 

The acquisition of housing must be understood in a legal sense, that is, when it occurs in accordance with the provisions of Article 1,462 of the Civil Code, which provides:

"The thing sold will be deemed delivered when it is placed in the power and possession of the buyer.

When the sale is made by means of a public deed, the granting of the deed will be equivalent to the delivery of the thing that is the object of the contract, unless the contrary is clearly stated or deduced from the deed itself."

Furthermore, in order to determine the date of acquisition, it must be taken into consideration that Spanish law, according to the Supreme Court and the majority opinion of the doctrine, includes the theory of title and mode, such that "the record of a contract of sale in a private document does not transfer ownership by itself if the tradition of the thing sold is not accredited" (Judgment of April 27, 1983). Tradition can be carried out in many ways, including for real estate: the delivery and possession of the thing sold, the delivery of the keys or titles of ownership or the granting of a public deed; This granting, as provided by the Civil Code, is equivalent to delivery provided that the contrary does not result or is inferred from it.

In no case is the date of signing of an earnest money contract synonymous with the concept of required acquisition. Consequently, if the acquisition (legal acquisition) does not occur within the two-year period, the taxpayer will lose the right to exempt from tax the capital gain generated, if applicable, by the transfer.

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.2 for additional information in the declaration form.

Completion of the corresponding section of Annex C.2, 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 denied 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.

Furthermore, regarding the application of the exemption for reinvestment in a primary residence, please note the recent doctrine established by the TEAC in its Resolution of March 31, 2025, Claim number 00-06769-2024:

“With effect for periods in which the purchaser of a home can no longer claim the “deduction for investment in a main residence” after Law 16/2012, of December 27, which adopts various tax measures aimed at consolidating public finances and boosting economic activity, the possibility of including the capital gain obtained from the transfer of the main residence under the exemption for reinvestment in another main residence provided for in Article 38.1 of Law 35/2006, of November 28, on Personal Income Tax and partial amendment of the Corporate Income Tax, Non-Resident Income Tax and Wealth Tax laws, is not an option under Article 119.3 of Law 58/2003, the General Tax Law, but a right of the taxpayer, which the taxpayer may exercise by filing the Personal Income Tax return for the year in which that capital gain was obtained, or with after that time, requesting the rectification of the self-assessment declaration initially submitted for that year.”

Therefore, this criterion is applicable to homes acquired from 01/01/2013 onwards, since the taxpayer cannot take advantage of the transitional regime of deduction for investment in main residence, so the reinvestment exemption ceases to meet the requirements to be considered a “tax option”. For those acquired prior to that date, the deduction can be applied, but not together with the reinvestment exemption. It should be remembered that Article 68.1.2 of the Personal Income Tax Law established as a limit that the amounts that were to constitute the basis of said deduction had not benefited from the reinvestment exemption; The taxpayer must choose between applying the exemption or the deduction, with respect to the concurrent amounts.

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.

Example:

Mr. MGB, 56 years old, transfers his main residence in 2025 for an amount of 95,000 euros. The property was purchased in 1995 for an amount equivalent to 60,000 euros, including the costs and taxes inherent to the acquisition. The acquisition was financed by a mortgage loan, of which an amount of 4,000 euros remains to be repaid at the time of sale.

Of the amount obtained from the sale, 4,000 euros are allocated to the repayment of the outstanding loan.

In the same year, 2025, he bought a new main residence for an amount of 91,000 euros, investing the rest of the amount obtained from the sale of his previous home for this purpose.

Determine the amount of exempt capital gains from reinvestment.

Solution:

Transfer value: 95,000

Acquisition value: 60,000

Capital gain (95,000 - 60,000) = 35,000

Exempt capital gains from reinvestment: 35,000

Capital gains subject to tax: 0

Note to example: Given the existence of a mortgage loan on the property transferred, the amount that must be reinvested to obtain full exemption from the capital gain obtained is the difference between the transfer value (95,000 euros) and the amount allocated to the outstanding repayment of the mortgage loan (4,000 euros), that is, 91,000 euros, the amount that has actually been reinvested.