Blog post copyrighted © 2018. Plagiarism will be criminally prosecuted.
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By Raymundo Larraín Nesbitt
Director of Larraín Nesbitt Lawyers
14th November 2018
The Supreme Court makes the headlines (again), but this time for good reasons.
In a ruling from last month, the Supreme Court established that Stamp Duty is only paid on the outgoing share in a Dissolution of Joint Property Ownership (DJPO, for short), not on the full property value as until now.
I remind readers that following a DJPO is ideal on the following three cases (with up to 80% in tax savings):
So, what on earth does this new change mean in layman’s terms?
It simply means you pay less taxes now – which is always a welcome respite.
It always boggled the mind on why Stamp Duty was paid on the full 100% of the property when only a share or % was actually being transferred.
With this new tax change, a joint owner will only be required to pay Stamp Duty strictly on the outgoing share only, which translates into a massive tax saving. However, the damper is that I must stress that the change still requires further like-minded rulings to consolidate it and become the new High Court doctrine. This is the new direction going forward on this tax on DJPOs.
This is more clearly seen with an example.
Example. Husband and wife divorce. They jointly own a villa in Andalusia. Wife buys 50% of the husband’s outgoing share on a property worth €500,000.
Before: ex-wife paid 1.5% Stamp Duty on the full property value= €7,500 euros
Post-ruling: ex-wife pays now = €3,750 euros (50% less tax)
Stamp Duty is a devolved tax of Spain’s 17 different autonomous regions. Each region is empowered to fix the tax rate within a sliding scale that varies between 0.5 and 1.5%. In Andalusia, for example, it is set at 1.5%.
And to close, as a gold nugget, the Supreme Court magistrates behind this new key ruling, are the same ones that ruled last 16th of October that lenders were to pay for Stamp Duty on mortgage loans, not the borrower; this landmark ruling caused a great commotion when the Supreme Court stepped in to appeal its own ruling and which prompted the Government to pass a new law on Stamp Duty to settle the matter amid the social backlash. They are a High Court section specialized in taxation.
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