By Welex, conveyancing lawyer in Marbella. Occasionally, clients of our multilingual law firm in Marbella, who co-own 50% of a home, wish to transmit their share of the property to the other owner. This extinction of the condominium involves a series of expenses and fiscal implications that we will clarify in this post.
Article 400 of the Civil Code in Spain says that “no owner will be obliged to remain in the community. Each of them may ask at any time to divide the common thing.”
In this post, we will refer to the dissolution of a co-ownership by two individuals of a single indivisible good, such as a house. One of the co-owners decides to transfer his share to the other; this co-owner now becomes the sole owner of the home in exchange for economic compensation.
Generally, in condominium extinction in Spain, one of the parties transmits its percentage to the other party through an economic compensation that the second performs in favour of the first. We may understand that between the two co-owners a sale is taking place. However, if we treat it as a condominium extinction (complying with the legal requirements), the tax implications will be more beneficial for both parties.
The extinction of the condominium in Spain is subject to a type of documented legal acts (Spanish stamp duty), which can range from 1% to 2% depending on where the property is located. In Andalusia, for example, it would be subject to 1.5% stamp duty of the market value of the home and not on the value of the compensation.
On the other hand, if we treat this transaction as a sale, it will be subject to the Spanish transfer tax modality. Depending on the autonomous community, the fiscal impact of this can be more burdensome. In Andalusia, it would be 8%, 9%, or 10% on the value of the economic compensation.
As we have explained, the extinction of a condominium in Spain imposes a less fiscally taxing situation of adjudging a part of the house, when the same is co-owner of another part already. The acquirer of the property is obliged to pay the stamp duty in Spain.
The extinction of the condominium in Spain does not entail, for the transferor, the payment of the municipal plusvalia tax. The regulations of this tax do not consider the extinction of the condominium as a transfer of assets. In case of future sale, the sole owner of the home will be obliged to pay the plusvalia tax being the date of acquisition, the one for which both co-owners bought the home.
In regards to personal income tax, there would be no alteration in assets for neither the acquirer nor for the transferor derived from the extinction of the condominium. This is provided the adjudication coincides with the ownership fee.
These assumptions of extinction of condominium can be confusing. So, we invite you to approach Welex, our motivated conveyancing law firm in Marbella, with any further questions.
The post Spanish taxes that affect the extinction of a condominium appeared first on Welex.