Ending a co-ownership in Spain (e.g. after a divorce or inheritance) is not considered a regular sale for tax purposes, but a legal restructuring. As a result, you do not pay a high transfer tax (8-10%), but the much lower division duty (Actos Jurídicos Documentados), which typically ranges between 0.5% and 1.5%.
When partners or co-owners decide that one party takes over the Spanish property in its entirety, the Extinción de Condominio (dissolution of co-ownership) the legally and fiscally correct way. In this article, we analyse the tax impact, pitfalls surrounding gifts and the crucial role of the mortgage bank.
1. Registration tax (ITP) vs apportionment duty (AJD)
The fundamental difference between selling a house to a third party and buying out a partner lies in the nature of the tax. Since a buyout does not involve the transfer of a 'new' property, but the redistribution of an existing property, it qualifies under stamp duty.
Comparison of tax rates
To understand the tax impact, we compare the standard transfer tax (Impuesto de Transmisiones Patrimoniales - ITP) with the distribution right (Actos Jurídicos Documentados - AJD).
| Type of transaction | Spanish tax | Rate (Region-dependent) | Application |
| Sales to third parties | ITP (Transfer Tax) | 8% – 10% | Calculated on total sales value. |
| End of co-ownership | AJD (Distributive justice) | 0,5% – 1,5% | Calculated on the value of the acquired part. |
Expert Insight: "Many Belgians compare this mechanism to the Flemish 'miserietaks' (dividing rights). In Spain, the principle is similar, but the savings compared to a regular sale are often even greater in percentage terms."
Calculation example: The impact in Andalusia
Suppose: A couple, married in community of property, own a villa in Marbella with a market value of € 400.000. Both partners (A and B) own 50%. Partner A wishes to acquire full ownership after the divorce.
- Scenario A (Misclassification as sale):
If this would be treated as a sale, one pays 8% ITP.
Cost: 8% at €200,000 (the part of B) = €16,000.
- Scenario B (Correct Extinción de Condominio):
One applies the apportionment duty (currently 1.5% for these deeds in Andalusia, although temporary reductions are possible).
Cost: 1.5% on €200,000 = €3,000.
Conclusion: By choosing the correct legal route, partner A in this example saves directly € 13.000.
2. Critical Pitfalls: Exchange and Donation
On stepping out of undivided ownership, the balance of compensation crucial. The tax authorities strictly check whether the buyout price corresponds to the actual market value. Any deviation can lead to reclassification to a more heavily taxed regime.
Risk 1: The unintended sale (Exchange)
When the co-ownership is terminated by the exchange of property (for example: Partner A gets the house in Alicante, Partner B gets the house in Málaga), the Spanish tax authorities often consider this as a Permuta (exchange).
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Consequence: The transaction is taxed as a sale. You will pay the full registration load (ITP) of 8-10% instead of the low distribution right.
Risk 2: The hidden donation
If Partner A takes over Partner B's share without pay a market-based financial consideration, there is no buyout, but a gift (Donaciones).
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Consequence: Gift tax in Spain is progressive and region-dependent, ranging from 7.65% to 34%.
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Disadvantage: Unlike inheritance tax, gifts between non-residents are often subject to fewer exemptions.
3. What happens to the existing mortgage?
Changing the title deed at the notary means not automatically that the bank releases the departing partner from his or her obligations. This is a common misunderstanding with major financial risks.
The procedure follows two strict steps:
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Extinción de Condominio (Notarial): Ownership is transferred to one name.
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Novación de Hipoteca (Banking): The loan is adjusted so that only the remaining owner is liable.
If step 2 is skipped, the departing partner (in our example B) remains jointly and severally liable for the debt even if they no longer own the property. Banks may require a "new" interest rate or refuse the novation if the remaining partner is insufficiently solvent.
Note: Get a written agreement from the bank on the Novación before you sign the notarial deed of partition.
FAQ: Frequently asked questions about leaving undivided property in Spain
How much tax do I pay to buy out my partner in Spain?
You pay the distribution duty (AJD - Actos Jurídicos Documentados) on the value of the acquired share. Depending on the autonomous region, this rate is between 0.5% and 1.5%. This is significantly lower than the 8-10% transfer tax in a regular sale.
Is an 'Extinción de Condominio' the same as a sale?
No. Legally, it is a redistribution of property and not a transfer of assets to a third party. Fiscally, it is more beneficial because it falls under stamp duty instead of transfer tax, provided there is proper financial compensation.
Can I take my name off the Spanish mortgage without penalty?
Not necessary. Removing a name requires a mortgage innovation. Banks may charge administrative fees or a commission for this (often 0.5% to 1% of the outstanding capital). In addition, the bank may revise the interest rate terms to the current market rate.
What if I don't give money for my partner's share?
If there is no quid pro quo (money or assumption of debt) in return for the transfer, the Spanish tax authorities consider it as a donation. You will then pay gift tax, which can be as high as 34%, instead of the low apportionment tax.
About the author: Glenn Janssens is a lawyer specialising in Spanish real estate transactions and tax regulations. Since 2017, he has been helping Belgian and Dutch individuals and entrepreneurs safely purchase and structure real estate in Spain. He guides files from A to Z: from due diligence, ownership and tax control to estate planning and optimisation for residents and non-residents. Thanks to his years of experience, hundreds of handled files and focus on transparent communication, Glenn makes complex Spanish legislation understandable and practically applicable for every property buyer.
