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The Supreme Court ruled that reinvestment in housing through a mortgage also gives the right to income tax exemption

2020-10-27T22:11:50.200Z


The high court ruled in favor of a woman to whom the Treasury claimed 41,255 euros, considering that she had only reinvested the money that she paid in cash and not the amount of a loan in which she was subrogated


Facade of the Supreme Court in Madrid, in a file image.EFE

The Supreme Court considers that "in order to apply the exemption in personal income tax [personal income tax] for the reinvestment of a habitual residence, it is not necessary to fully use the money obtained from the sale of the previous home."

The high court believes it is "enough to apply for the same purpose money borrowed from a third party, either directly or as a result of subrogation in a loan previously contracted by the transferor of the property."

In a judgment that establishes the interpretative criterion that the courts must follow from now on, the Second Section of the Contentious-Administrative Chamber has agreed with the appellant, modifying the previous criterion of the Supreme Court of Catalonia, which had ruled in favor of the liquidation of the tax made by the Treasury.

The Tax Agency claimed more than 41,000 euros from the plaintiff, considering that it had recorded an undue exemption from personal income tax for reinvestment in habitual residence.

The IRPF regulation recognizes the right to deduct part of the tax when buying a house in which you are going to live.

In the case of selling a house to buy another, the Supreme Court had to determine whether it is necessary to use in its entirety the money obtained from the previous sale or if it is enough to apply for that purpose other money borrowed from a third party, even in cases where which is done by subrogating a loan contracted by the transferor of the property.

Subrogation is common in new construction, when the buyer directly takes over part of the developer's loan in exchange for the transfer of the home, changing the ownership of the loan from one to another.

The events prosecuted date back to 1998, when the appellant bought land on which she later built a house.

He sold that house in 2006 for 600,000 euros, with which his capital gain exceeded 263,000 euros and the amount that he had to reinvest to obtain the full exemption from personal income tax was calculated at 347,000 euros.

Also in 2006, the appellant bought a home for 280,000 euros, but for this she paid 32,000 euros in cash with the money she had obtained from the previous house and subrogated herself in a loan that the transferor of the home had for a value of 248,000 euros. remaining.

In 2012, the Treasury claimed 41,255 euros, 32,790 euros for tax debt and the rest for interest, considering that he had only reinvested in the house the 32,000 euros that he paid in cash when signing the purchase, and not the 248,000 euros of the loan he had contracted.

The Superior Court of Justice of Catalonia agreed with the Treasury, but for the Supreme Court that means making “an interpretation of the concept of reinvestment of a practically physical nature, understanding that it is a material transfer of a monetary flow from an origin to a predetermined destination ”.

For the magistrates who sign the sentence, whose speaker has been José Díaz Delgado, this interpretation is made “instead of attending to the economic concept of investment, understanding that there is reinvestment when the new asset acquired (the habitual residence of destination) equals or exceeds the price obtained from the sale of the preceding asset (the habitual residence of origin) ”.

And they conclude that "neither the Law nor the Regulation [on personal income tax] contain a single rule that validates the current administrative criteria described".

For this reason, the ruling shares the criterion set forth by the appellant and affirms that “reinvestment must be understood as an economic legal negotiation act, given the reality of the same and complying with the periods established by law and always independently of the monetary payments of the credit / loans / mortgage debt assumed in the new acquisition ”.

That is, how much does it matter if you pay in cash with the money obtained from the sale or if you borrow money for the purchase of a new house;

What is relevant for the Supreme Court is that the amount of the house in which the money is reinvested is higher than the profits obtained from the sale of the previous home.

Source: elparis

All business articles on 2020-10-27

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