Tax blow to marriages in their investment in primary residence

The Treasury limits to 50% the exemption in Personal Income Tax (IRPF) when one of the spouses sells a private dwelling to buy a new habitual residence under the joint ownership regime.

The Central Economic-Administrative Tribunal (TEAC) has ruled that when a taxpayer sells a dwelling that belonged to them privately and allocates the total funds obtained to acquire a new residence under the joint ownership regime, the tax benefit of the exemption in IRPF for reinvestment is conditional on the percentage of ownership that they actually acquire in the new property.

When the new acquisition is configured as joint ownership without express attribution of different quotas, the maximum applicable tax exemption is limited to 50%, regardless of the origin of the funds.

This unified criterion directly affects the financial and tax planning of marriages that decide to change their habitual residence using the private assets of only one of the spouses.

From now on, taxpayers who allocate the total amount obtained from the sale of their previous dwelling to the acquisition or self-promotion of a new dwelling in the name of the joint ownership will see their tax exemption limited to half of the construction or purchase cost of the new property, under article 38.1 of the IRPF Law.

The other half of the capital gain obtained from the transmission of the original property will not be exempt and will be subject to tax in the savings taxable base.

This can translate into complementary provisional settlements and unforeseen tax debts for families who considered that the simple material disbursement of funds in the new family home was enough to access the tax benefit.

Furthermore, it prevents the spouse who did not contribute funds from benefiting from this exemption, as they have not transmitted any previous habitual dwelling of their own.

The TEAC's intervention responds to the need to resolve the disparity of criteria that existed between the different Regional Economic-Administrative Tribunals (TEAR).

The TEAR of Cantabria had supported the thesis of the State Agency of Tax Administration (AEAT), dismissing claims in which taxpayers demanded a total exemption of 100%, arguing that the invested money came exclusively from their private accounts.

On the other hand, other bodies such as the TEAR of the Valencian Community and Andalusia had issued resolutions of the opposite sign in previous years, highlighting the resolution of the Andalusian tribunal of June 2012.

These regional tribunals considered that the origin of the funds was the determining factor and that the joint ownership of the new habitual residence did not prevent the total exemption of the contributing spouse if it was demonstrated that the money from the private sale had been entirely used to finance the new common home.

To resolve the controversy, the TEAC has analyzed the interaction between civil and tax legislation.

From a civil law perspective, the joint ownership regime constitutes a "Germanic community" or common hand, according to the doctrine of the Supreme Court.

In this type of community, spouses do not have individual quotas or own a physical or theoretical half of the common assets during the marriage.

However, the TEAC clarifies that, for the purposes of IRPF taxation, the rule of income individualization prevails, as collected in article 11 of the IRPF Law.

This tax precept stipulates that common assets will be attributed by half to each spouse, unless a different participation quota is documented.

In this way, the fiscal presumption of attribution at 50% prevails over the private origin of the funds.

In line with the arguments of the General Directorate of Taxes (DGT) and the AEAT, the appeals tribunal emphasizes that the right to exemption for reinvestment requires the taxpayer to allocate the money to acquire an asset that becomes part of their own legal ownership.

In cases where one spouse contributes more funds than their share for the purchase of a joint asset, the portion that exceeds their 50% quota is interpreted, for tax purposes, as indirect financing or help for their spouse to acquire their respective half of the property.

Therefore, since that half of the money is allocated to the acquisition of a third party, it does not meet the objective requirements of reinvestment provided in article 38 of the IRPF Law.

This doctrine aligns with several binding consultations of the DGT, such as V0120-20 or V1248-22, which limit the tax benefit to the percentage of real ownership.

The TEAC's resolution requires greater rigor and prior advice for taxpayers who intend to reinvest private capital gains.

In this scenario, it is advisable to analyze in detail how the ownership of the new habitual residence will be structured before formalizing the purchase and sale deed.

The choice of the acquisition modality of the new property - whether privately, through attribution of mixed quotas or under the classic joint ownership regime - will have determining consequences in the IRPF declaration.