If you are a joint owner with your spouse, civil partner or with a friend it is important to consider the obligations and tax implications if you sell or inherit half of the property. Equally, some married couples or partners were advised to put the property in one name but now find that their spouse or partner can have a higher than expected inheritance tax bill. Also, a person may own Spanish property in his/her own name and wish to transfer half to a new spouse or partner.
Ending co-ownership or joint ownership
In Spain it is possible to bring co-ownership to an end in a deed of Extinction of Co-Ownership – ‘Extinción de Condomino’. The ownership must be transferred to only one joint owner, so this does not work if there are four owners who want to transmit to two. However, it is practical in many situations such as divorce or the end of a business relationship where one party wants to retain ownership.
A notarial deed is signed by both parties, either in person or by the use of a power of attorney in the Spanish form. The transaction costs are for the notary, land registry and legal fees. The tax authorities in Andalusia charge 1.2% tax on the fiscal value. We can establish the fiscal value of the property for you. If there has been a divorce in Spain and there has been a 50/50 split of assets, the transaction should be tax exempt, though there are some issues arising where the couple cannot show they were married in community of property. The tax situation needs to be ascertained because there are also other matters such as the local improvement tax – ‘plus valia’ – and the question of tax retentions.
Declaration of community of property
In Spain this is tax exempt where you can show that a couple have decided to own their private assets in community of property instead of in their individual names. This is called a ‘Declaración de Comunidad de Bienes’ and is also tax exempt if you can show a couple have decided to declare they will own all their assets jointly in future. This can be suitable where someone has purchased property in Spain in his/her own name and after marriage they decide they want to own the asset jointly, particularly if it is the family home.
In either case we can advise on your particular situation before making any transfer of property.
For more information and a consultation, contact De Cotta Law on + 34 952 527 014 or email [email protected] We have offices in Mijas Costa, Nerja, Coín and Tenerife. For our Tenerife office call +34 922 719520