Joint ownership dissolutions
reasoning has always been debated and would not for example be applicable when a straight sale of a part interest in a property is made to a third party in which case the tax base would be the value of the specific share of ownership in the property that is transferred.
The recent High Court decision dated 9th October 2018 passes judgement on a case in which two spouses dissolved the situation of co-ownership regarding a property owned in their joint names on a 50% / 50% basis by assignment of the entire property to the husband in exchange for the payment of its value to the wife. The regional High Court of Justice of the Valencian Community ruled that the stamp duty due on the transaction should only be charged on the actual value of the share of ownership transferred (i.e. in this case only 50% of the value of the property) and that the tax office’s claim for the said tax to be paid on the entire value of the property was not admissible. This initial ruling was contested by the local tax office and the matter referred to the central High Court for judgement.
In the reasoning of the judgement issued by the High Court, an initial reference is made to the fact that there is no specific rule in the corresponding tax statute which determines what the tax base of a transaction extinguishing a situation of joint ownership actually is. As such, and in the case of a bilateral legal transaction which basically transfers an interest of 50% of the ownership of the property to the remaining co-owner, the tax base should be the value of the said 50% of the property transferred due to the fact that the other 50% share of ownership is already owned by the other coowner who ultimately acquires the freehold ownership of the entire property.
In addition to the aforesaid reasoning, the Court also referred to the fact that in the case of the dissolution of a commercial community of assets with the assignment of property or interests in property to each of the original members of the community of assets, it is accepted that the stamp duty on commercial transactions would be due at the corresponding rate on the specific value of the actual asset, or share of the asset, assigned to the member of the community.
In third place, the High Court referred to previous precedents which, despite referring to and clarifying the legal nature of this type of transaction, make no specific reference to the fact that the tax base of the transaction is the value of the entire asset which is the subject of the extinction of the community of owners.
The judgement finally concludes and establishes as legal doctrine on the basis of all of the above that, in the case of the dissolution of a situation of coownership documented in a notarial deed with regard to assets that cannot be physically divided into separate shares to be assigned to each of the initial coowners, the corresponding stamp duty is calculated on the basis of the value of the share of ownership previously owned by the coowner who leaves the community of assets by transferring this to the sole remaining owner.