If you are married in community of property, unless otherwise stipulated in the purchase deed, you will each own half of the property in Spain. Also, couples married under system of separation of assets have usually bought 50/50. In case of divorce, agreements should then be made on the division of the Spanish property. This post will explain what the most common options are for couples with property in Spain who are getting divorced.
Possibility 1: one partner wishes to buy out the other partner
It regularly happens that one of the partners wishes to keep the Spanish country house. If the financial means are available, the acquiring partner can take over the other partner's share without having to pay registration fees. However, the acquiring partner does pay a distribution duty, which, depending on region to region, is between 0.5 - 2% on the entire property. The transferring partner pays capital gains tax and plusvalia muncipal. An example.
A and B are married in community of property and bought a Spanish property in Denia worth €300,000 five years ago. A and B thus each own the property for 50%. However, they have decided to divorce out of wedlock. A wishes to keep the property for sentimental reasons. B actually cannot stand the heat well and would rather cut ties with Spain. The property is currently valued at 350,000 euros.
A will therefore take over B's share worth €175,000. Since the registration fee in Denia is 10% on the transferred amount, the tax cost for A in case of sale is 17,500 euros. In the case of partition, however, the tax cost for A is 1.5% on 350,000 euros, i.e. 5,250 euros. A big difference.
B will pay capital gains tax on the part transferred. This is 19% on a capital gain of 25,000 euros less some deductible expenses, e.g. 10,000 euros. The capital gains tax is then 19% on €15,000 or around €2,850. In addition, B basically still pays the municipal plusvalia muncipal of e.g. €2,000, but possibly B enjoys a divorce exemption.
Thus, if there is agreement between both partners, this option is advantageous in a divorce.
Possibility 2: a mutual transfer is not possible
Often, the alternative then is a sale of the entire property to third parties. For example, because one of the partners does not have sufficient funds to compensate the other partner. In this case, both partners pay capital gains tax on the net capital gain and the plusvalia muncipal. Registration duties and notary fees are for the buyer.
Possibility 3: no agreement between partners
If nothing can be agreed, the partners can appoint an independent third party to conduct the sale. If even that is not possible, there is nothing left for the exiting partner to do but to start legal proceedings. The property will then be sold publicly under the supervision of a Spanish court.