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V1092-22 19 May 2022 · SG de Impuestos Patrimoniales, Tasas y Precios Públicos Criterion in force
ISD · asunción liberatoria de deuda

Release of mortgage debt without consideration constitutes a donation subject to Inheritance and Gift Tax

A query was raised regarding how to determine the taxable base when a child assumes their parents' mortgage debt to release them from the obligation. The DGT ruled that the gratuitous assumption of debt for the purpose of releasing the debtor is a free legal transaction subject to Inheritance and Gift Tax.

The question raised

An extension to consultation V1039-22 is requested regarding the determination of the tax base in the event of a donation through the forgiveness of mortgage debt.

The DGT's ruling

The assumption of another person's debt without consideration is considered a gratuitous 'inter vivos' legal transaction according to the LISD and its Regulations. In this case, the tax base shall be the mortgage liability from which the debtor is released, including the outstanding principal, interest, and other mortgage guarantee expenses.

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