Reinvestment in primary residence in a house under construction

The Supreme Court allows the application of the personal income tax exemption on the capital gain obtained from the sale of the primary residence, provided that the reinvestment is made within two years of the sale, regardless of whether the new home is under construction.

In July 2020, the State Attorney’s Office filed an appeal in cassation in which it maintained the criterion of denying personal income tax exemption for capital gains obtained from the transfer of the primary residence when the reinvestment, even if within two years of the transfer, was made through the purchase of a home in the construction phase.

However, to the taxpayer’s delight, the Supreme Court has finally issued a favourable ruling, as it understands that the two-year period required to reinvest the amount from the sale of the previous main residence can be carried out through the purchase of a property under construction, it being sufficient for the corresponding amount to be reinvested within this period, without the need for the construction to be completed.

The previous criterion had been confirmed by the High Court of Justice of Catalonia; however, not all the Courts followed the same criterion.

This ruling opens up the possibility of reviewing the situation of those taxpayers who have not been able to apply the deduction for the reasons mentioned above and, where appropriate, submit a request for rectification of the personal income tax return.