Joint own­er­ship dis­so­lu­tions

Costa Blanca News (South Edition) - - Residents' Advice Desk -

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.

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