"Giving away" a property

Due to family circumstances here, we will not now be moving to Spain full time as was the original plan. Although we can still keep the property until things are better, we would prefer to dispose of it amicably rather than problems occur over 50/ 50 payments. The mortgage is up to date, all fees paid, etc, so it isn't a hardship case, we just need/ would like rid of the property.

We know someone that is willing to take the property off our hands f.o.c (lucky us!!) to enable us to walk away and nurse our losses. They are able to subrogate the mortgage, so it "should" be as simple as handing over ownership and mortgage to the new owner and walking away. As we know, nothing is Spain is that simple!!

I have spoken to our solicitor, who has told us that even though no monies are changing hands, we will still be charged capital gains on a sale price and of course, the transfer tax is payable by the new owner. The transfer tax I can understand, but capital gains? What gains?

So the question is, what is the best way of doing this? If one of the 50/ 50 payments isn't met, then the property could end up being repossessed anyway, so no taxes, although chased for the outstanding balance. Would prefer to leave it all square.

Mark

Dear Mark,

sorry to hear that news, be careful you are not blamed here for lack of due diligence.

have you ever let the property?

surely then you would be able to claim tax relief on legitimate losses?

what is the 50/50 sum have you bought half of something?

Good luck

Norman

No Norman, we have been happy with the purchase. It's there (unlike some unfortunate peoples), we have benefitted greatly from regular visits and made some good friends. We have also been lucky enough to rent out over July and August every year as we won't go that time of year, and we are llup to date with taxes.

The 50/ 50 I refer to is my paying 50% of the mortgage and my Wife paying 50% of the mortgage, not dodgy finance deals. I won't delve any deeper in that side of things, suffice it to say we can pay quite nicely (even with the mortgage rate increases), but it could be in the future that one or the other wants to be difficult and not pay, leaving 100% to the other party.

Mark

Hi Mark,

thanks for the explanation but it seems basic sense that if you have declared the income you should be able to claim the losses if not the actual interest (or some part) paid

Regards

Norman

The solicitor cannot give a definitive answer. The problem comes where no funds are changing hands, merely a change of ownership.

Mark

Hi Mark,

I wonder if the "aged" can give away assets tax free - in love and devotion to family members?

Norman

If the aged gave away something that had devalued by such a huge %age, then most probably.Anyway, even if it has increased in value, it is tax free if kept for longer than 7 years. This property has decreased by a substantial amount, so why should there be tax to pay on it?

Anyway, thanks for the input, but his "divergence" won't get my question answered.

Mark

The two departments approach valuation quite differently.

Transfer tax is normally assessed on the higher of the declared escritura price or the deemed book value (multiiple of catastral value). If the deemed book value is excessive you could consider asking the Junta valuations department to re-value before completion.

The CGT office look at transactions they consider unusual and that would normally be permuta (swap) rather than subrogation (mortgage). They would only re-value if it really looked odd. They are less likely to work by reference to multiple of catastral value and more so by reference to other properties and price per sq me etc plus plot etc - a different valuations approach.

I have only ever had one CGT challenge and that was becuase it was a complex transaction and also involved permuta. I had to draw a schematic for them to even understand the transaction. The schamatic explained how the property was acquired and how it was disposed. It involved multiple modelo 211s and so on .....

It is possible to appeal and the appeal fees are very low by comparison to court litigation but you would need to find a lawyer specialising in these type pf appeals.

There will be a 3% CGT retention and you will need to submit a CGT return.

If you have a EUR100k property and a EUR100k mortgage then the escritura price for the property in terms of transfer tax payable and CGT calculations is EUR100k.

A lot of times the tax office don't re-assess CGT is that becuase no matter how you jig the figures with indexation relief high acquisition and disposal costs it's still a loss - so just do your sums and check your valuations and then you will have some idea where you stand.

Don't forget you will also have to pay plusvalia and the bank will want a % for the subrogation.

PM me and I will do any calculations you want.

 If you are being charged capital gains tax when selling a proprty you have made no gains, of course, you have full  rights for the corresponding administrative and contencious-administrative appeals.