Some of the most common files we handle on the Costa Blanca are not sales to a third party at all. They are cases where one of two owners wants out. A couple separates. Two siblings inherit an apartment and only one of them wants to keep it. Two friends bought a house 50/50 twelve years ago and one of them now wants the capital released.
Spanish law has a specific instrument for exactly this situation: extinción de condominio, the dissolution of co-ownership, in which one co-owner takes the whole property and compensates the other. It is not the same thing as a sale, and the tax difference is substantial. In the Valencian Community, since 1 June 2026, the rate is 1.4% instead of 9%.
Nobody has to stay in a co-ownership
Article 400 of the Spanish Civil Code gives every co-owner the right to demand the dissolution of the co-ownership at any time. There is no minimum period, and the other co-owner cannot block it indefinitely.
The difficulty is that an apartment or a villa cannot in practice be physically divided. Article 404 then applies: if the co-owners do not reach agreement, the property is sold at public auction and the proceeds are split. An auction normally means a price well below market value, plus court costs and one to two years of litigation. That is why a voluntary dissolution before a notary is almost always the better route — even where relations between the co-owners have broken down.
How it is done
The mechanics are straightforward: a notarial deed in which co-owner A is awarded 100% of the property and compensates co-owner B in money, or by taking over the mortgage. The deed is then registered at the Land Registry and A appears as sole owner.
The tax treatment — the part that matters
Spanish law does not treat this as a transfer but as the specification of a right the co-owner already held. As a result the operation does not attract transfer tax (ITP, 9% in the Valencian Community since 1 June 2026, and 11% on the part of the taxable base above €1,000,000). It attracts stamp duty (AJD) instead, whose general regional rate was reduced from 1.5% to 1.4% on 1 June 2026 by Law 5/2025.
The Supreme Court has also settled that the taxable base is the value of the share being acquired, not the value of the whole property (judgment 1502/2019 of 30 October 2019, confirmed in judgments 719/2024 and 731/2024 of April 2024).
Worked example — property valued at €200,000, held 50/50:
- A takes the whole property and pays B €100,000.
- AJD: €100,000 × 1.4% = €1,400 (form 600, within 30 working days of the deed).
- The same deal structured as a sale: €100,000 × 9% = €9,000.
That is roughly €7,600 of difference on an entirely ordinary property, on top of notary and registry fees, which are similar either way.
Municipal plusvalía and capital gains
Where there is a single property that cannot be divided and one co-owner is compensated in cash, the excess of adjudication is unavoidable, and the settled position of the Spanish tax authorities is that no taxable event arises for municipal plusvalía (IIVTNU). It should still be declared to the town hall as non-taxable, since some municipalities take their own view.
On capital gains, the operation is in principle neutral provided the award matches the shares and no values are stepped up. If values are updated, or the departing co-owner receives more than their share is worth, a taxable gain arises.
This is where the trap lies in most Nordic and British separations: if the co-owner leaving is not tax resident in Spain, the one taking over must withhold 3% of the compensation and pay it over using form 211, exactly as on an ordinary purchase from a non-resident seller. If this is not done, the acquirer is answerable to the tax authorities for the amount. It is almost always discovered too late — once the money has already been paid to the former partner.
The mortgage does not follow automatically
A point that causes a great deal of disappointment: the deed changes ownership, but it does not release the departing co-owner from the mortgage. The bank is not a party to the deed and is not bound by it. Removing a borrower requires the bank’s consent through a novation or a new loan, and the bank will assess the remaining owner’s ability to pay on its own criteria. Settle this with the bank before the notary appointment — otherwise the person leaving can remain jointly and severally liable for a loan on a property they no longer own.
Divorce: a detail that costs foreign couples money
Spanish law exempts the dissolution of the Spanish matrimonial property regime (sociedad de gananciales) from AJD. That exemption does not normally apply to foreign couples, who usually appear at the Land Registry as two ordinary co-owners holding 50% each. That is a plain co-ownership: AJD is payable, and the Spanish part of the division should be documented separately from the foreign divorce decree.
Before you sign
Check the property’s official reference value (valor de referencia) before fixing the value in the deed — a declared value well below it tends to attract a review. Also check for unpaid community fees, unpaid IBI or charges registered against the property, and make sure the departing co-owner’s NIE and tax status are properly documented.
You can run the figures yourself with our calculators: purchase costs, capital gains tax and municipal plusvalía.
Contact us
We review your situation, calculate the tax and handle the whole process through to registration at the Land Registry.
Email: [email protected]
Phone: +34 629 549 430
Web: www.colas-abogados.com