Costs of divorce for a couple of non-residents and property settlements in Spain: lear how to minimise the cost in tax and along the process.
When a couple from another EU country with property interests in Spain get divorced in their country of origin, the question arises as to how to register the property in Spain on behalf of the spouse who has been awarded the property. Additionally there are important tax implications that need to be considered.
The best practice in order to avoid extra costs of divorce and property settlements is to include reference to any property belonging to the couple in Spain in the divorce proceedings taking place in their country of origin. In this case, the divorce decree, duly legalised and translated should be taken to the relevant notary in Spain to sign a deed of ‘end of joint-ownership’ to which the divorce decree should be attached.
It is important that there is equality between the spouses , that is, that each of them is awarded assets of the same value in the divorce settlement or , if one spouse is awarded property of greater value than the other, there should be financial compensation. This equality of distribution is important because in this case no taxes are levied.
However, if one of the spouses happens to be awarded assets of a greater value , they are liable to pay taxes on the excess allocation compared to the other spouse.
Finally, once the above procedures have taken place, the new property deed is deposited with the Land Registry to register the property in the name of whichever spouse has been awarded the property.
Should the divorce proceedings in the country of origin not refer to the Spanish properties, it becomes necessary to draft a deed of ‘dissolution of the joint-ownership’.
However the fiscal advantages available when the joint-ownership had ended, do not apply to the dissolution of a joint-ownership.
Accordingly, it becomes necessary to pay the ITP sales tax (typically levied at between 8% – 10% of the value of the property transmitted). One half of the tax is then payable by the spouse who is taking ownership of the property.
A price should be stated in the property deed, and it is this figure upon which the tax payable is calculated. If a price is not stated, then it would be considered to be a gift/donation, for which an even higher amount of tax would be levied.
In conclusion, it is vitally important that any Spanish assets owned by a married couple are included in the divorce proceedings that take place in the couple’s country of origin in order to avoid high costs and taxes that would otherwise be levied.