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V1039-22 9 May 2022 · SG de Impuestos Patrimoniales, Tasas y Precios Públicos Criterion in force
ISD · asunción liberatoria de deuda

Assumption of debt by a child without consideration may constitute a gift, unless it is a loan repayment

A taxpayer inquired whether the novation of a mortgage loan to remove them as a co-borrower, leaving their child as the sole debtor, constitutes a gift. The DGT indicates that the assumption of debt without consideration is a gift, but this may not be the case if it is proven to be the repayment of a previous loan from the parent to the child.

The question raised

Whether, considering that the acquired apartment is almost the exclusive property of the consultant's son, that the mortgage loan obtained was used exclusively for the acquisition of said apartment, and that the repayment of the aforementioned mortgage loan is being made entirely with the son's money, the novation of the loan consisting of the exclusion of the consultant as co-borrower would constitute a gift.

The DGT's ruling

The assumption of another person's debt without consideration constitutes a taxable event for Inheritance and Gift Tax. However, if the discharge of the debt is actually the method of repaying a prior loan made by the father to the son, there would be no gift due to the absence of animus donandi. The taxpayer must prove these circumstances, as the public deed presumes the debt and not the existence of a prior loan.

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