Tax Consequences of Divorce and Property Distribution in Spain

  • Pedro
    Pedro heads a multi-lingual, multi-disciplinary law firm located in the centre of Torrevieja. For more than 20 years he has provided English-speakers in the area with expert guidance on such matters as property conveynaces and property law in general, contractual disputes, commercial law including business formation, as well as family law and inheritances.
  • Carmen
    Carmen is a highly experienced lawyer and leads a multi-disciplinary law practice with offices across Murcia. Expert legal advice is offered in all major areas of the law including property law, contract breach/debt recovery, family law and inheritances as well as business formation and taxation.

I am in the process of going through a divorce in the UK and we have a property in Spain. What are tax implications of transferring the property in Spain into one of our names only, as per the divorce agreement?

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The most tax efficient manner to achieve this outcome is to draft a deed in a public notary’s office to bring a formal end to the co-ownership of the property and by which the co-owners can expressly confer the entire ownership to either spouse, with the other partner or spouse paying the equivalent amount in monetary terms. In those cases involving the enforcement of divorce agreements, the amount of the financial compensation for the interest in the property will be as stated in the divorce agreement.

The tax applicable to such operations is known as AJD (Actos Jurídicos Documentados) and is equal to 1.5% of the value of the property in the Valencia region. In tax terms therefore, this is a great deal preferable to the outright purchase by one partner or spouse of the interest belonging to the other partner or spouse, which would result in the payment of a 10% tax on the value of the part of the property purchased.

It should be remembered that the dissolution of a co-ownership can only be carried-out between co-owners of a property and may not involve third parties. Also, in those cases where there is still a mortgage on the property, the co-owner that is relinquishing their interest must take great care to obtain the approval of the bank that has conferred the mortgage. For if the bank does not approve the assumption by one co-owner of responsibility for repayment of the entire mortgage the spouse or partner relinquishing their interest in the property may find themselves with no property but a continuing obligation to repay the bank.

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