Smiling young man real estate broker handshaking with older family couple after buying selling prope

The Supreme Court in Spain has recently announced a ruling that changes how the concept of a “habitual residence” is defined. And this could produce numerous tax benefits for elderly people who have had to move into nursing homes.

The latest judgement considered that a home doesn’t stop being considered the individual’s habitual residence if they were forced to leave it for a number of circumstances, including divorce, marriage, a job transfer, or any other similar situation.

This ruling, it is thought, could therefore benefit people living in an old people’s home and who want to sell what was their habitual residence.

IRPF tax exemptions for the over 65s

In normal circumstances, taxpayers over the age of 65 (and those who are severely disabled) have some tax advantages when selling a house. For example, if the home being sold is the habitual residence, they are exempt from personal income tax (IRPF), which means that the seller can save between 19% and 23% of the income obtained. And this is without having to reinvest the amount obtained in the purchase of a new home.

Until now, the law regulating the IPRF tax stipulates that a property is no longer considered your main residence when you stop living in it for more than two years. Therefore, when it’s sold, the capital gain is not exempt from IRPF, even if you’re over 65 years old or you’ve reinvested the money in another primary residence. 

Now, however, this High Court ruling opens the door to considering that taxpayers who have moved to a nursing home and have decided to sell what was their habitual residence, in which they have not lived for more than two years, would also be entitled to the exemption.

Will the IRPF exemption apply this year?

While this exemption could apply this year, until the Courts formally recognise this possibility, it’s advisable to still pay tax on this gain and then request the refund later.

This will avoid the possibility of receiving a demand for late payment interest and even being penalised.

Does this also apply to Inheritance Tax?

Yes, this is something that the Supreme Court and several High Courts of Justice have already declared.

Costaluz Lawyers, your tax experts in Spain

If you’re in need of professional tax advice or assistance, our team at Costaluz Lawyers is ready to lend a hand. We have a specialised group of tax experts who are well-versed in the complexities of Spanish tax law. Whether you are an individual or a business, we’re here to offer personalised guidance and support that caters to your unique requirements.

Contact us today to learn more.

Maria Luisa Castro

Director and Founder
María founded CostaLuz Lawyers in 2006 and is the Firm’s Director. María is registered Lawyer number 2745 of the Cadiz Bar Association and is licensed to practice in all areas of law throughout Spain. Working closely with her team, María has developed the firm into one of the most highly regarded and trusted Spanish Law Firms acting for English-speaking clients with legal problems in Spain. We’re here to help. Contact us today for a free, no-obligation, initial legal orientation.
María Luisa De Castro - Costaluz Lawyers

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