Principal Residence item

Regulations: Additional Provision twenty-third Law IRPF and 41 bis Regulation IRPF . See also art. 55.5 Regulation IRPF , in the version in force as of December 31, 2012

For the purposes of applying this exemption:

1. The taxpayer's habitual residence is considered to be building in which the taxpayer resides for a continuous period of at least three years .

However, it will be understood that the dwelling had a habitual character when, despite not having elapsed said period, the death of the taxpayer occurs or other circumstances occur that necessarily require the change of domicile, such as marriage, marital separation, job transfer, obtaining the first job or change of job or other similar justified circumstances.

The regulatory expression "circumstances that necessarily require a change of address" implies an obligation to change said address. The term “necessarily” is an adverb that, according to the Dictionary of the Royal Academy, means with or by necessity or precision. In turn, the term “need” can indicate everything that is impossible to escape, lack or resist. Even more enlightening is the noun precision, included in the definition of “necessarily,” since it implies an obligation or indispensable need that forces and requires one to do something. Finally, one of the definitions of “necessary” confirms the above: It is said of something that is done and executed due to something else, as opposed to voluntary and spontaneous.

Consequently, its application requires considering whether, in a given situation, changing domicile is an option for the taxpayer or is beyond his or her will or convenience; That is to say, the fact that one of the listed circumstances or other similar ones occurs is not decisive in itself, nor does it simply constitute an exception to the general requirement of effective residence for three years. In the first case, that is, if the taxpayer retains the possibility of choosing, there will not be a circumstance that allows for an exception to the three-year period and, therefore, if the taxpayer decides to change address, the home will not be considered habitual. Along the same lines, it can be stated that if the concurrence of circumstances similar to those listed in the Twenty-Third Additional Provision of Law IRPF is proven, the three-year period may be excepted, provided that they also require a change of address.

2. In order for the acquired dwelling to constitute the habitual residence of the taxpayer, it must be effectively and permanently inhabited by the taxpayer himself, within a period of twelve months , counted from the date of acquisition or completion of the works.

However, it will be understood that the acquired dwelling does not lose its habitual character when the following circumstances occur:

• When the taxpayer dies.

  In the event of the taxpayer's death before the reinvestment period expires, that is, without having acquired the new primary residence, after having opted to benefit from the reinvestment exemption, and having committed to reinvest the sale proceeds in the acquisition of a new primary residence, this cannot be considered a breach of the reinvestment requirement to which the taxpayer had committed.

• When other circumstances occur that necessarily prevent the occupation of the dwelling under the terms provided above.

• When the taxpayer enjoys a habitual residence due to position or employment and the acquired residence is not used, in which case the twelve-month period will begin to count from the date of cessation.

When the dwelling has been effectively and permanently inhabited by the taxpayer within a period of twelve months, counted from the date of acquisition or completion of the works, the three-year period to consider it as the taxpayer's habitual will be computed from this last date

Occupation within twelve months.

Regarding this requirement of occupying the habitual residence within the twelve months established in article 41 bis of the Personal Income Tax Regulations take into account that it does not constitute an additional requirement for considering the building as a habitual residence but rather it extends the deduction for investment in housing since the taxpayer may apply the deduction even if he or she does not reside in it, provided that he or she occupies it within that period. This deduction, however, will not be consolidated until the residence acquires the status of habitual residence, which, as we have said, will occur when the taxpayer resides there for a continuous period of three years.

3. For the exclusive purposes of applying the exemption, it will be understood that the taxpayer is transferring his habitual residence when it constitutes his 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.

Compliance with this requirement:

• Case of separated or divorced spouses

  Please note the interpretative criteria established by the Supreme Court in its ruling No. 553/2023, of May 5, filed in administrative appeal no. 851/2021 ( ROJ : STS 2021/2023), according to which "in situations of separation, divorce or annulment of marriage that have determined the cessation of effective occupation as a habitual residence for the spouse who has to leave the habitual residence for such reasons, the requirement of effective occupation of the habitual residence at the time of the transfer or on any day of the two years prior to it, required by section 3 of art. 41 bis of the IRPF Regulation , will be deemed to be fulfilled when such situation occurs in the spouse who remained there". Therefore, the exclusive effects of the application of the exemptions provided for in articles 33.4. b) and 38 of the Personal Income Tax Law , it will be understood that the taxpayer who had to abandon the family home due to the attribution of its use to the other spouse, is transferring the habitual home when, for the spouse who remained in it, it constitutes his or her habitual home at that time or would have been considered as such until any day of the two years prior to the date of transfer.

• Assumption of a lease with option to purchase

  By virtue of the option contract, one of the parties, granting the option, grants the other, beneficiary of the option, the so-called right of option or better "power of configuration" insofar as it is a power that allows the holder to configure in the future a legal relationship in his favor that allows him to decide, within a certain period of time and unilaterally, the conclusion of a contract, which in the case of the purchase option, is a contract of sale. Once the purchase option is exercised, the contract by which it was granted is consummated and the sale is perfected (See in this regard STS no. 1012/2003 ( ROJ STS 6894/2003), of November 5, 2003).

  Therefore, in accordance with Article 41 bis.3, provided that the option is exercised within two years of the home ceasing to be the habitual residence of the couple, it will be understood that the transferred home is their habitual residence and therefore the reinvestment exemption will be applicable when the amount obtained is reinvested in a new habitual residence within the specified period.