Dissolution of Joint Property Ownership

Raymundo Larraín Nesbitt, September, 7. 2017

By Raymundo Larraín Nesbitt
Lawyer – Abogado
8^th of September 2017

Are you fed up with your partner? Did you know there is a special procedure in Spain to terminate property co-ownership which can save you up to 80% in taxes? Interested? Read on.

Most property owners are unaware there is a legal way that can be followed in Spain to re-arrange property holdings which can save co-owners a considerable amount in taxes. On buying resale property in Spain, a buyer is normally liable for Property Transfer Tax or ITP (which ranges between 7% to 10% depending on the region in Spain where the property is located). However, on following what is known as a “Dissolution of Joint Property Ownership” (DJPO, for short) a buyer only attracts 1.5% Stamp Duty.

Signing a deed of Dissolution of Joint Property Ownership allows joint owners to re-arrange their share on a property in a tax-efficient manner as it enables the outgoing joint owner to transfer his share to an existing co-owner legally waiving the extreme Property Transfer Tax and paying in lieu 1.5% Stamp Duty on the full property value. This results in average tax savings of up to 86%!

This service is suitable:

In a divorce or separation.
Re-arranging inheritances.
Re-arranging property holdings between family and friends.

DJPO Requirements

Both buyer and vendor need to be pre-existing owners of the property.
If there is an outstanding mortgage on the property, a lender’s permission may be required to release the outgoing borrower/owner from his commitment.

Associated Taxes and Fees

Buyer

Liable for 1.5% Stamp Duty on the full property value (not only on the outgoing share).*
Lawyer’s fees.
Notary fees.
Land Registry fees.

_{* In some regions of Spain this tax is actually lower.}

Vendor

Capital gains tax on the outgoing share.
Lawyer’s fees.

If the vendor is non-resident, a 3% retention is practiced on the outgoing share.

CGT payable:

19% EU/EEA-residents
24% non-EU/EEA-residents

Example: Married couple own a property in joint names. One of them wishes to terminate the situation and sell his share to his ex-partner.

Property is worth €300,000. Husband only pays 1.5% on the full property value or €4,500 in lieu of 8% Property Transfer Tax. This amounts to a tax reduction of over 80%!

Legal fees: on application

Larraín Nesbitt Lawyers, small on fees, big on service.

Larraín Nesbitt Lawyers is a law firm specialized in taxation, inheritance, conveyancing, and litigation. We will be very pleased to discuss your matter with you. Please contact us for a free initial consultation. You can contact us by e-mail at info@larrainnesbitt.com, by telephone on (+34) 952 19 22 88 or by completing our contact form.

Legal service Larraín Nesbitt Lawyers can offer you

Dissolution of Joint Property Ownership

DJPO related articles

Lifetime Loans or Reverse Mortgages in Spain Explained – 21st February 2011
Advice to Struggling Mortgage Borrowers in Spain – 8th March 2011
Dissolution of Joint Property Ownership – 8th of May 2011
Spanish Mortgage Loans: Beware of Abusive Clauses – 8th January 2012
Spanish Mortgage Loans: An Overview – 21st February 2012
Mortgage Collar Clauses Revisited (‘Cláusulas Suelo’) – 8th December 2013
Bank Repossessions in Spain – 21st February 2014
Bad Debtor’s List (‘Fichero de Morosos’) – 8th April 2014
Spanish Creditors Pursuing Debts Abroad – 8th May 2014
Dación en Pago Explained or How to Hand Back the Keys – 8th December 2014

Please note the information provided in this blog post is of general interest only and is not to be construed or intended as substitute for professional legal advice. This article may be posted freely in websites or other social media so long as the author is duly credited. Plagiarizing, whether in whole or in part, this article without crediting the author may result in criminal prosecution. VOV.