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V5165-16 29 November 2016 · SG de Impuestos Patrimoniales, Tasas y Precios Públicos Criterion in force
ISD · asunción liberatoria de deuda

Release of a co-debtor from a mortgage debt may be subject to Inheritance and Gift Tax

The inquirer asks whether excluding an ex-partner from a mortgage loan by assuming their debt is subject to ITPAJD or Gift Tax. The DGT indicates that if the release from the debt is carried out without consideration, it is considered a donation subject to Inheritance and Gift Tax.

The question raised

Whether the release of the co-debtor is subject to Transfer Tax and Stamp Duty or to Gift Tax.

The DGT's ruling

If the inquirer assumes the debt of their former partner in a novation without receiving anything in return, the taxable event for Inheritance and Gift Tax occurs due to the liberatory assumption of debt. However, if it is proven that said release is actually the repayment of a previous loan made by the former partner to the inquirer, there would be no gift due to a lack of animus donandi. The burden of proof to demonstrate this repayment lies with the interested party.

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