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V1160-19 28 May 2019 · SG de Impuestos Patrimoniales, Tasas y Precios Públicos Criterion in force
ISD · asunción liberatoria de deuda

Release of a co-debtor from a debt without consideration may be subject to Inheritance and Gift Tax

The inquirer asks whether excluding an ex-partner from a mortgage loan by assuming their debt entails tax liabilities. The DGT indicates that if the release of debt is carried out without consideration, it is considered a gift subject to tax, unless it is proven to be the repayment of a previous loan.

The question raised

Whether the release of the co-debtor is subject to Inheritance and Gift Tax.

The DGT's ruling

The gratuitous assumption of another's debt without consideration constitutes a gratuitous legal transaction subject to Inheritance and Gift Tax. However, if the release of the debt is actually the repayment of a loan made to the taxpayer by a former partner, there would be no taxable event due to the lack of animus donandi. This circumstance must be sufficiently proven by the interested party to rebut the presumption of a gift.

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