Know the tax consequences of divorce regarding property distribution in Spain: a Q&A explaining a usual case to learn from and save money.
A Q&A illustrating a usual example for tax consequences of divorce to learn from:
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, for example.
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.