The 2022 Income Tax Campaign has begun and it is important to know the criteria of the courts in the taxation of real estate properties. José María Salcedo, an expert lawyer in tax litigation, offers five key issues to take into account when declaring the transfer of a real estate property.

The transfer value of the property to be included in the personal income tax return

The Cadastre reference value must be considered, which is the actual amount for which the transfer was made for valuable consideration, and the market value in the case of free transfers. The Catastro reference value is relevant in the calculation of the capital gain or loss in the IRPF, and must be declared in the Inheritance and Gift Tax in case of gratuitous transmissions. It is important to take into account these issues to avoid problems with the Treasury and to request refunds of undue income.

Is it possible to update the acquisition value of a property and reduce the capital gain?

Since January 1, 2015, the possibility of applying updating coefficients to the acquisition value of a property in the Personal Income Tax (IRPF) return was eliminated. The Tax Agency categorically rejects such updating and will notify a tax settlement in case of detecting it in an IRPF return. However, the Constitutional Court has admitted a question of unconstitutionality raised by the High Court of Justice of Andalusia, which considers that the suppression of the updating coefficients may violate the principle of economic capacity. Therefore, it is recommended to be taxed following the current IRPF rules, without applying any update to the acquisition value of the property, but to request the rectification of the IRPF self-assessment in order to apply the coefficients in case of obtaining a favorable ruling from the Constitutional Court. It is important to do so as soon as possible, since the Constitutional Court limits the effects of its declarations of unconstitutionality to those who have not claimed before the ruling is issued.

If you are divorced and have not lived in the couple's primary residence for years, can you get tax benefits if it has been transferred?

In this case, you could lose tax benefits associated with the sale of that home. The Tax Agency considers that once a certain period of time has elapsed, the home ceases to be habitual for the divorced taxpayer, which means that no reinvestment exemptions or other tax benefits can be applied. Although this issue is before the Supreme Court, it is advisable to declare the capital gain without applying exemptions, and then request the rectification of the self-assessment filed and the refund of undue income before the end of the IRPF campaign to avoid problems with the AEAT.

If I am the bare owner, can I apply exemptions for the sale of my principal residence?

The Supreme Court has ruled that the joint owners of a property cannot apply exemptions for the sale of the main residence. According to a recent ruling, it is necessary to have full ownership of the property for at least three years to be able to enjoy the exemption for reinvestment in the acquisition of a new primary residence. Being the bare owner is not enough. This is a doctrine established by the Supreme Court and it is not possible to apply a different interpretation.

Is it possible to offset losses due to the donation of real estate in the personal income tax return?

The compensation of losses on donations of real estate in the personal income tax return is not allowed according to a resolution of the Central Economic-Administrative Court. However, there is discrepancy in other courts, such as the Superior Court of Justice of the Valencian Community. It is recommended to file the return without including the loss compensation and then request the rectification of the self-assessment. It is important to do so before the end of the tax return period to avoid problems with the Tax Agency.

The Personal Income Tax return is an opportunity to save on taxes.

The IRPF declaration can be an opportunity to save taxes if the capital gains and losses are correctly declared and the criteria of the Courts that benefit the taxpayer are known. Having a lawyer specialized in tax litigation is important to make sure you file properly and pay the right amount in taxes.

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