In the real estate and tax field, one of the operations that has generated the most doubts in recent years has been the purchase of homes with mortgage subrogation. Many buyers wondered whether, by assuming the outstanding debt of an existing mortgage, an additional obligation to pay Stamp Duty Tax (AJD) was generated.
Today, at last, there is a definitive answer.
What does the General Directorate of Taxes (DGT) say?
Through a binding consultation, the Directorate General of Taxes has clarified that the assumption of the mortgage debt by the buyer does not generate a new payment of AJD. Specifically, it indicates that the subrogation of the mortgagor that takes place within a purchase and sale of real estate is not subject to the gradual quota of the AJD modality of the Transfer Tax.
This means that, when the sale is formalized and the buyer is subrogated to the existing mortgage, there is no separate or additional tax registration that implies a new taxable event for AJD.
Why is AJD not paid in this case?
As argued by the Tax Authorities in their resolution:
“This subrogation does not produce a registration different from that which originates the transfer of the property itself, because it is understood that the only registrable operation is the change of ownership of the transferred property that guarantees the mortgage”.
In addition, the mortgage remains unaltered in its conditions, and only the debtor changes, which does not affect the mortgage base or its registry configuration.
What does this mean for buyers and sellers?
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Direct tax savings: the buyer will not have to pay AJD for assuming the mortgage in a sale and purchase, thus reducing the total cost of the transaction.
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More legal certainty: the doubts faced by notaries, tax advisors and real estate agents as to whether or not this taxable event existed are definitively dispelled.
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Greater flexibility in real estate transactions: this clarification may encourage more buyers to opt for mortgage subrogation when it is in the interest of maintaining the pre-existing financial conditions.
Conclusion
This change in tax criteria is good news for the real estate market, especially at a time when mortgage operations are becoming more expensive and subrogation is an interesting option for buyers who wish to take advantage of previous conditions.
With this binding consultation, the DGT provides legal certainty to a very common procedure in second-hand sales, favoring both individuals and professionals in the sector.
