Recovery of a vehicle through judicial ruling is not subject to Transfer Tax

The Directorate General of Taxes (DGT) has issued a relevant ruling regarding the tax nature of recovering ownership of a vehicle when this occurs as a consequence of the termination of a sales contract through a judicial sentence.

What the DGT has ruled

The inquiry analyzes whether the recovery of ownership of a vehicle, derived from the termination of a contract, should be subject to Transfer Tax and Stamp Duty (ITPAJD). The advisory body has determined that the recovery of ownership through the termination of a contract does not constitute an onerous transfer of assets, in accordance with the provisions of Article 32.1 of the Regulation of the Transfer Tax and Stamp Duty.

Furthermore, the DGT specifies that if the termination is ordered by a judicial body, there is no liability for the variable rate of Stamp Duty, provided that no public deed is executed to formalize said act.

What it means for you

This ruling has a direct application for individuals who recover ownership of a vehicle following the judicial termination of a sale. In practical terms, the operation does not generate the obligation to pay Transfer Tax, as there is no intent to transfer ownership, but rather a return to the state prior to the sale due to the termination of the contract.

However, it is necessary to take into account that if a public deed is chosen to register the recovery of ownership in the Registry of Movable Property, the operation will be subject to the variable rate of the Stamp Duty modality.

What you should do

In a situation involving the judicial termination of a vehicle sale, it is fundamental to analyze how the registration of the recovery of ownership will be carried out. If the goal is to avoid the tax burden of the variable rate, the necessity of executing a public deed versus the mere execution of the judicial ruling should be assessed. Given the complexity of judicial proceedings and their registration effects, it is recommended to evaluate each case individually to determine the most appropriate path according to the legal status of the vehicle.