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V2967-19 24 October 2019 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · comunidad de bienes

Dissolution of a joint ownership with excess allocation compensated in cash may be exempt from IIVTNU and ITPAJD

A joint ownership consisting of two co-owners with two rental properties intends to dissolve by allocating one property to each and compensating the difference in value in cash. The DGT analyses the liability for VAT, ITPAJD, IIVTNU, and IRPF regarding this transaction.

The question raised

Taxation for the purposes of Value Added Tax, Transfer Tax and Documented Legal Acts Tax, Real Estate Transfer Tax, and Personal Income Tax.

The DGT's ruling

The dissolution of a community of property, as it does not involve business activities, is taxed under documented legal acts. Excess adjudication is not subject to Transfer Tax (ITPAJD) or Real Estate Transfer Tax (IIVTNU) if the asset is indivisible or loses value upon division and is compensated in cash. For Personal Income Tax (IRPF) purposes, proportional adjudication does not generate gains or losses, but the co-owner receiving a value exceeding their share will realize a capital gain or loss.

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