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V0197-20 28 January 2020 · SG de Impuestos Patrimoniales, Tasas y Precios Públicos Criterion in force
ITPAJD · extinción de condominio

Extinction of co-ownership with excess allocation taxed via ITP or gifts, unless the asset is indivisible and compensated in cash

A query was raised regarding the taxation of the extinction of co-ownership through exchange or economic compensation, considering whether assets are divisible or indivisible. The DGT ruled that the dissolution of each community of property must be treated independently and that any excess allocation will be taxed according to the nature of the compensation.

The question raised

Taxation under the Transfer Tax and Documented Legal Acts Tax in the event of the extinction of a co-ownership through economic compensation or the barter of participation percentages in each of the real estate properties, taking into account whether said properties are divisible or indivisible.

The DGT's ruling

The dissolution of a community of property does not constitute a transfer if the co-owner does not receive more than their share, being taxed only on documented legal acts. If there is an excess of adjudication, this shall be taxed as an onerous transfer (if there is cash compensation) or a donation (if it is gratuitous). However, if the asset is indivisible and the compensation is in cash, the excess is not an onerous transfer and is taxed at the variable rate for documented legal acts. If the compensation is made with assets from another community, the operation is classified as a barter.

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