The Directorate General of Taxes (DGT), through binding consultation V2215/2024 of 15 October, has detailed whether it is possible to apply the exemption for the sale of the main residence in the event that it has been rented before the sale. Specifically, the taxpayer questions whether it would be possible to apply the exemption to a home that was once the usual one, but that the taxpayer stopped living in and dedicated to renting. To this end, the taxpayer asks whether it would be sufficient to return to the home and reside in it for at least three years before proceeding with its sale.
In the opinion of José María Salcedo, an expert lawyer in tax proceedings and Managing Partner of Salcedo Tax Litigation, we are facing very common cases. It is common for the taxpayer to reoccupy a residence that he or she ceased to live in, and complete the three-year period necessary for this home to acquire the status of habitual residence, and the exemption provided for in article 33.4.b or 38.1 of the Personal Income Tax can be applied.
The Tax criterion expressed in the aforementioned binding consultation is that if at the end of the lease the taxpayer returns to reside in the home for at least three years, said home could recover its habitual status and, therefore, benefit from the tax exemption for reinvestment (article 38.1, LIRPF), without the need to meet the requirement of being 65 years old. Alternatively, in the event of transferring the property after the lease when the taxpayer is over 65 years of age, the exemption for capital gain contemplated in article 33.4.b) of the Personal Income Tax could be applied.
The DGT thus underlines the importance of correctly planning the times and use of homes in order to benefit from tax incentives, especially in construction, transfer and leasing scenarios. These clarifications are key for many owners who seek to optimize their taxation when addressing the sale and reinvestment in their main residence.
In addition, José María Salcedo recalls that the Directorate General of Taxes has also ruled on the rental of the main residence prior to its transfer in other cases, which are also very common.
The first of these is the case in which the taxpayer, while continuing to live in his or her home, has rented one or more rooms continuously until the time of sale. In this case, the criterion of Taxes, detailed in the binding consultation V2770-18, of 24 October, is that "having had part of the property rented for seasons, if the consultant transfers the property before three years have elapsed from the date of end of the last lease, may not apply the exemption provided for in article 33.4.b) of the Tax Law to the proportional part of the capital gain that corresponds to the part of the dwelling that has been rented. On the part of the dwelling that he has used privately, including the common areas, he may apply the aforementioned exemption to the capital gain that proportionally corresponds to this part of the dwelling, having resided continuously in it for more than three years."
Therefore, in this case , the exemption could only be applied to the proportional part of the dwelling that has not been rented.
Recently, it has also been raised whether the tourist rental of the property, during holiday periods, means that it loses its habitual character and it is not possible to apply the exemptions associated with the transfer of the property in the Personal Income Tax.
In these cases, Salcedo considers that there is a high risk that the Treasury will interpret that the taxpayer's main residence is not such, because it has been rented during the year. And to the extent that said holiday rental is extended for several months, even discontinuously, this will make the Tax Agency think that the property no longer meets the requirement to be the usual one, but is permanently available to be rented.
In his opinion, in these cases we are facing a problem of proof, and the taxpayer must demonstrate that, despite not living in the home during the holiday periods in which it has been rented, it has not ceased to be his habitual residence. But, in any case, the more weeks the property has been rented, the more difficult it will be to convince the Administration.
However, José María Salcedo refers to an interesting resolution issued by the Provincial Economic-Administrative Court (TEAF) of Guipúzcoa, on 7-11-2019, on this issue. This, in a case in which the deduction for investment in housing that had been applied to a taxpayer was suppressed, because he rented said home during holiday periods.
The Regional Court not only agrees with the taxpayer, but also refers to "the new realities that require an adaptation of the interpretation of certain concepts established in tax law, to accommodate them to the new uses and customs of citizens. At this time, it is necessary to interpret the concept of habitual residence established in article 87.8 of the Foral Law." Therefore, it concludes that "the obligation to reside effectively and permanently in the home does not prevent the taxpayer from being temporarily absent from it (on holidays, weekends, business trips, etc.), provided that they are absences compatible with the necessary degree of stability and continuity in the occupation of the property. In addition, the consideration of a dwelling as habitual does not exclude that income in money or in kind may be obtained for it, while it is temporarily empty."
"It is, without a doubt, an interesting resolution that taxpayers can cite to defend themselves against the Treasury," Salcedo concludes.
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