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Practical manual for Income Tax 2020.

Exempt capital gains

Capital gains that arise from the following are exempt from IRPF

A. Donations of goods with the right to deduction in the quota

Regulations: Art. 33.4.a) Law Income Tax

Capital gains that may arise from donations of assets that meet the requirements to entitle the donor to the corresponding deduction in the tax rate are declared exempt for the donor, so they should not be included in the declaration.

See, within Chapter 16, in the section " Deduction for donations ", the requirements and conditions relating to donations of property.

B. Transfer of habitual residence by persons over 65 years of age or by persons in a situation of severe or high dependency

Regulations: Art. 33.4.b) and Fifteenth Additional Provision of the Personal Income Tax Law

The gain derived from the transfer, whether onerous or lucrative, of the habitual residence of taxpayers over 65 years of age should not be included in the tax base, whether the habitual residence is transferred in exchange for a capital sum or in exchange for a temporary or lifelong income. The exemption also applies to the transfer of bare ownership of the primary residence by its owner over 65 years of age, with the latter reserving the lifetime usufruct on said dwelling.

Unlike the above, when the full ownership of a home is divided between the bare owner and the usufructuary, neither of them will be eligible for the exemptions provided for on the occasion of the transfer of the home, even if it is their habitual residence.

In identical terms, the capital gain derived from the transfer of the habitual residence made by persons in a situation of severe or great dependency is also declared exempt in accordance with the Law on the promotion of personal autonomy and care for persons in a situation of dependency.

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

See the concept of habitual residence for the purposes of this exemption contained in the Twenty-third Additional Provision of the Income Tax Law

C. Delivery of assets of the Historical Heritage in payment of personal income tax

Regulations: Art. 33.4.c) Law Income Tax

In cases where the payment of the tax debt corresponding to IRPF is made, in accordance with the provisions of article 73 of Law 16/1985, of June 25, on Spanish Historical Heritage, through the delivery of assets that are part of the aforementioned Historical Heritage, the capital gain that may be demonstrated by the difference between the acquisition value of the asset delivered and the amount of the tax debt is exempt from IRPF .

D. Payment in lieu of the habitual residence

Regulations: Art. 33.4.d) of the Personal Income Tax Law

Capital gains in which the following circumstances occur are declared exempt from IRPF :

  1. When they are established at the time of the transfer of the debtor's or the debtor-guarantor's main residence.
  2. When the transfer of the residence is carried out through a dation in payment, or in a judicial or notarial foreclosure.
  3. When the purpose of such is the cancellation of debts guaranteed with a mortgage pertaining to the main residence, contracted with credit institutions or any other entity that professionally carries out the activity of granting loans or mortgages.

  4. 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.

E. Capital gains from the transfer of certain properties

Regulations: Thirty-seventh Additional Provision of the Personal Income Tax Law

1## Capital gains arising from the transfer of urban properties acquired for valuable consideration between May 12, 2012, and December 31, 2012 will be exempt by 50% ##.

The exemption applies to urban properties regardless of whether they are used in relation to economic activities.

This partial exemption is not applicable when the taxpayer has acquired or transferred the property to his or her spouse, to any person related to him or her by blood or marriage, up to the second degree included, or to an entity in respect of which any of the circumstances established in article 42 of the Commercial Code occur with the taxpayer or any of the aforementioned persons, regardless of residence and the obligation to prepare consolidated annual accounts.

In the case of reinvestment when the property transferred is the taxpayer's habitual residence and the amount reinvested is less than the total amount received in the transfer, the proportional part of the capital gain obtained will be excluded from taxation, once the exemption provided for in this Additional Provision has applied, which corresponds to the amount reinvested in the terms and conditions provided for the exemption for reinvestment of habitual residence in article 38 of the Income Tax Law. That is, the 50% exemption on the profit obtained from the transfer will be applied first. Of the other 50% of the profit, the proportional part corresponding to the reinvested amount will be exempt.

The conditions and requirements for the application of this exemption are discussed in section Profits excluded from taxation in cases of reinvestment , of this same Chapter.

F. Exemption for shares or interests in newly created entities acquired before September 29, 2013

Regulations: Transitional provision twenty-seventh Law IRPF

Taxpayers who obtain capital gains that become evident on the occasion of the transfer of shares or interests in newly or recently created entities acquired from July 7, 2011 to September 29, 2013, and that have remained in the taxpayer's assets for a period of more than three years (counted from date to date) may apply the exemption provided for in the Thirty-fourth Additional Provision of the Personal Income Tax Law in its version in force on December 31, 2012 , provided that the requirements and conditions established in said Additional Provision are met.

G. Income obtained by the debtor in bankruptcy proceedings

Regulations: Additional Provision forty-third Law IRPF

Income obtained by debtors that is disclosed in bankruptcy proceedings under Law 22/2003, of July 9, and since September 1, 2020, in Royal Legislative Decree 1/2020, of May 5, approving the revised text of the Bankruptcy Law, are exempt as a result of:

  1. Debt relief and payment of debts established in :

    • Judicially approved agreement.
    • 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, included in Title II of the second book, articles 596 to 630, of Royal Legislative Decree 1/2020, of May 5, approving the revised text of the Bankruptcy Law,
    • Out-of-court payment agreement referred to in Title X of Law 22/2003, of July 9, Bankruptcy and, since September 1, 2020, regulates Title III of the second book, articles 631 to 694, of Royal Legislative Decree 1/2020, of May 5, which approves the revised text of the Bankruptcy Law.

  2. Exemptions from unsatisfied liabilities referred to in article 178 bis of Law 22/2003 and, since September 1, 2020, Chapter II of Title XI of Book One, articles 486 to 502, of Royal Legislative Decree 1/2020, of May 5, approving 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 .

    In the case of debts arising from the exercise of economic activities, the regime is provided for in Law 27/2014, of November 27, on Corporate Tax.

    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.

For informational purposes only, the table of correspondences of the provisions of Law 22/2003, of July 9, on Bankruptcy, with those of the consolidated text of the Bankruptcy Law, approved by Royal Legislative Decree 1/2020, of May 5, by virtue of the third Additional Provision thereof, may be consulted through the website of the Ministries of Justice and Economic Affairs and Digital Transformation .

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

Regulations: Fifth Additional Provision of the Personal Income Tax Law

Aid granted pursuant to the provisions of Royal Decree 920/2014, of October 31, regulating the direct granting of subsidies intended to offset the costs arising from the reception or access to television audiovisual communication services in buildings affected by the release of the digital dividend, will not be included in the tax base of this Tax.

I. Exempt profits from reinvestment

Regulations: Art. 38 Law of Income Tax

See its specific section in this Chapter.