Divorce and Your Spanish Assets

When a couple from another EU country with property interests in Spain get divorced in their country of origin, the question arises as to how to register the property in Spain on behalf of the spouse who may have been awarded the property.

Additionally there are important tax implications that need to be considered.

The best practice is to include reference to any property belonging to the couple in Spain in the divorce proceedings taking place in their country of origin. 

In this case, the divorce decree, duly legalised and translated should be taken to the relevant notary in Spain to sign a deed of ‘end of joint-ownership’ to which the divorce decree should be attached.

Finally, once the above procedures have taken place, the new property deed is deposited with the Land Registry to register the property in the name of whichever spouse has been awarded the property.

There have been a lot of foreign divorce orders dealing with Spanish property in recent years. When any division of matrimonial assets takes place it is important to ensure that any order from England, the UK and other countries can be put into effect and executed in Spain.

Even when there is an agreement between the couple about the division of assets there are important tax considerations. Legal advice should be sought before a Consent order is agreed or before any Order over Spanish property is made to ensure each party understands the tax implications.

Should the divorce proceedings in the country of origin not refer to the Spanish properties, it becomes necessary to draft a deed of ‘dissolution of the joint-ownership’. However the fiscal advantages available when the joint-ownership had ended, do not apply to the dissolution of a joint-ownership. Accordingly, it becomes necessary to pay the ITP sales tax (typically levied at between 8% – 10% of the value of the property transmitted).

One half of the tax is then payable by the spouse who is taking ownership of the property. A price should be stated in the property deed, and it is this figure upon which the tax payable is calculated. If a price is not stated, then it would be considered to be a gift/donation, for which an even  higher amount of tax would be levied.

 

A different situation arises where one of the parties tries to avoid or deny the effects of an order. Under EU Regulation 44/2001 of 22nd December it is possible to ask for a foreign order to be executed in Spain. The procedure for putting the order into effect will be Spanish procedure. 

This allows for an embargo or charge to be placed against the property to prevent the other party from disposing of the asset. This is particularly important where the property is registered in the sole name of one of the parties only. For example, a husband or wife in Spain may own property in their sole name and try to sell the asset without informing the divorcing spouse.

The Spanish court cannot alter or modify the order in any way unless there is a manifest error in the calculation or valuations.

Each case needs to be considered on its merits as tax obligations will vary.

Always ask yourselves…”is this what we really want”?