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V0709-21 25 March 2021 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · extinción del condominio

The dissolution of co-ownership with excess adjudication is taxed under Personal Income Tax, Real Estate Tax, and Transfer Tax depending on the case

Cousins inquire about the taxation of the dissolution of a co-ownership of three properties where one of them will receive the entirety of the assets by providing economic compensation to the other. The DGT analyzes the impact on Personal Income Tax, the urban land value increment tax, and the transfer tax.

The question raised

They request to know the taxation of the co-ownership dissolution operation for the purposes of Personal Income Tax, Transfer Tax and Documented Legal Acts Tax, and the Tax on the Increase in Value of Urban Land.

The DGT's ruling

Under Personal Income Tax, adjudication according to the ownership share does not generate a gain, but if there is an excess adjudication, a capital gain or loss is generated for the co-owners. Under the Real Estate Tax, dissolution without excesses is not a transfer, but if there is an excess, it is taxed on the transferred property (onerously if there is cash compensation). Under the Transfer Tax, dissolution without excesses is taxed as documented legal acts, whereas the excess adjudication of indivisible assets is also taxed under Transfer Tax if compensated in cash.

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