If you own a property in Spain with someone else and one of you wants to keep it, the usual route is to buy the other person out. The situation tends to be one of a few: a divorce or separation, an inheritance shared between siblings, relatives who would rather not own things together any more, or a joint purchase that now needs tidying up.
The question is nearly always the same. Can I keep the property and pay the others their share without a large tax bill? In Spain this is called extinción de condominio (the Spanish legal way to end co-ownership), and I explain the wider picture in my guide to dissolving co-ownership in Spain. This article focuses on the version where one owner pays the other: how it works, how the amount is calculated and what it costs in tax.
How to buy out a co-owner of a property in Spain
A buyout with financial compensation ends the co-ownership by giving one owner 100% of the property, while that owner pays the others for their share. It is usually the best way to avoid a forced sale. It is taxed mainly through AJD (stamp duty on the deed), which is cheaper than a sale, and it avoids plusvalía municipal (municipal land value tax). The tax base cannot fall below the valor de referencia (the Cadastre reference value), in proportion to the share of the owner who leaves. It can also trigger Spanish income tax for that owner if the property has gained value.
This is general guidance. A mortgage, the property values, the region and the dates can all change the result.
Two or more people own the property in shares (50/50, a third each, and so on). Ending the co-ownership removes those shares and leaves a single owner. The compensation is what balances the deal: if I take 100% and you leave, I pay you for your part. It looks like buying your half, and people often describe it that way, but legally it is treated as fixing the rights each owner has over a property they already held in common. That legal classification is what produces the favourable tax treatment at regional and municipal level, for example with plusvalía.
Buyout, sale or gift: what is the difference
The label on the deed matters, because each route is taxed differently.
| Route | What it is | Tax | When it applies |
|---|---|---|---|
| Buyout (extinción de condominio) | Ownership that was already shared is reorganised and one owner pays compensation | AJD; possible income tax for the owner who leaves | The property cannot sensibly be divided and one owner wants to keep it |
| Sale | One owner sells their share to the other as if to a stranger | TPO (transfer tax) or VAT | The parties choose to treat it as an ordinary purchase |
| Gift | Someone receives more than their share and does not compensate for it | ISD (gift and inheritance tax) | There is no real compensation, or the deal looks like a free transfer |
What keeps a buyout out of trouble is real compensation (money, or taking on a debt) together with an excess in what one owner receives that is justified because the property cannot be divided. A flat is the typical case. If the excess is voluntary and does not fit that reason, transfer tax appears.
When a buyout works and when it is a bad idea
It suits properties that cannot be split, such as a home or a garage space, where one owner wants to keep it and can afford the compensation, and where you want to avoid selling in a hurry, selling badly or going to court.
There is a mortgage
Many people assume the bank releases the owner who leaves without anyone signing anything. It does not. Without the bank’s signature, that person remains tied to the loan. If the bank does appear at the deed to approve the owner who leaves, that creates an extra act subject to AJD. I come back to this below.
You pay with other assets instead of money
If the compensation is not cash but assets that the receiving owner does not already share with the others, the deal becomes an exchange. That brings the taxes of a transfer: TPO, plusvalía and income tax.
There is no real compensation
Without genuine payment, the shadow of a gift appears and with it ISD.
How to calculate the buyout amount
One property
Agree a value for the property, which cannot be lower than the Cadastre reference value. Subtract any outstanding debt, such as a mortgage. Then split the result according to the ownership percentages. For a 50/50 property worth €200,000 with no debt, if I keep 100% I compensate you with €100,000.
Several properties: the case of Irene and Lara
With more than one property, the allocations are worked out property by property, the excess or shortfall in each is identified, and the results are netted off.
Irene and Lara are sisters who each own 50% of three properties. Property 1 (F1) is declared at €90,000, F2 at €15,000 and F3 at €27,000. The total is €132,000, so each sister’s ideal share is €66,000. Property by property, half of each is worth €45,000, €7,500 and €13,500.
In the final allocation Irene keeps F1 and F2, worth €105,000 together, and Lara keeps F3, worth €27,000. Irene therefore holds €39,000 more than her ideal share and Lara €39,000 less. The result: Irene pays Lara €39,000. The deed may show the compensation property by property, but set-off of debts between the two sisters applies (article 1195 of the Spanish Civil Code) and a single balance remains.
What tax do you pay when you buy out a co-owner in Spain
The main tax on the deed is AJD, charged on the share that changes hands. The tax base cannot be lower than the reference value for that share. Whether there is also income tax for the owner who leaves depends on whether the property has gained value, which I cover next. For the municipal tax, see the plusvalía section further down.
Plusvalía municipal: can you avoid it?
My usual approach is to ask for the transaction to be treated as not subject to the tax. The reasoning is that a buyout is an act that specifies or determines rights that already existed, and does not transfer anything new. We file the request with a simple copy of the deed.
The tax does not vanish, it is deferred. The person who ends up with 100% keeps the original purchase date and value, and will pay the accumulated plusvalía when they eventually sell to a third party.
Does the person who leaves pay income tax in Spain
Possibly. Even though the deal is a specification of rights under civil law, income tax can still produce a gain or a loss if the property has risen in value and compensation is paid.
The gain is declared in the Spanish income tax return (IRPF). Residents include it in their annual return, and non-residents declare it with their own form. I handle both, and the specifics for those who live abroad are in my article on tax for non-residents when you split a co-owned property.
Back to Irene and Lara. Lara gives up her 50% of F1 and F2 in return for €39,000. The transfer value is that compensation for the share she hands over, which is €39,000, leaving expenses aside. If the price actually paid is lower than the normal market value, the figure is adjusted, but otherwise the amount really received is used. The acquisition value is what the whole of F1 and F2 originally cost, multiplied by 37.14%. That percentage is the €39,000 excess divided by the €105,000 allocated to Irene. The resulting gain is €19,500.
If the parties keep the historic value instead, the income tax is zero. The catch is that the person who keeps the house then carries that tax cost into any future sale.
The reference value trap: a real mistake from 2025 and 2026
In the Irene and Lara case the deed was signed early in the year, but the notary’s office had worked with the previous year’s reference value. When we came to settle the tax, we checked the values on the day of the buyout. F1 had gone up from €90,000 to €130,000. F2 had no reference value. F3 had dropped to €25,000, against €27,000 declared.
The tax office treats the reference value as the minimum tax base. F1 was therefore settled on half of €130,000, which is €65,000, and not on the €45,000 the sisters had agreed. For F3 the declared value of €27,000 was higher than the reference value of €25,000, so the declared figure stood.
The rule to remember is that the date that counts is the date of the deed. For an inheritance, the date that counts is the date of death.
Several properties: the end of the tax trade-off
Until recently, anyone dividing several properties faced an awkward choice. If you reduced the income tax, you risked transfer tax, and if you protected yourself from transfer tax, the income tax rose.
There were two ways of looking at it. The global view treats all the properties as one collective estate, so only the person who receives the final net compensation pays income tax, with the risk that the tax office reclassifies the deal as an exchange and charges TPO. The individual view, which is the traditional position of the tax office and the central tax tribunal (TEAC), treats each property with a different origin as a separate co-ownership. That avoids TPO but can create income tax gains for several owners.
Judgment 719/2024 of the Supreme Court recognises the collective estate. Where the co-owners and their shares are identical across all the properties, the argument over whether there is one co-ownership or several is pointless for tax purposes. Dissolving them is a single partition, which removes the exchange risk.
The Spanish tax directorate (DGT) has said something similar in binding rulings V0505-25, V1420-25, V1524-25 and V2430-25. For income tax it looks at the whole operation, as the dissolution of one co-ownership, with a single gain or loss for the person who gives up their net share. For transfer and stamp duty (ITPAJD) it counts as many co-ownerships as there are properties. An excess on each indivisible property is therefore unavoidable and is taxed as AJD, not TPO, if there is compensation.
In practice that means income tax is assessed globally, so only the owner receiving the net compensation pays, and AJD is applied property by property without fear of TPO.
Buying out a co-owner when there is a mortgage
If you take on your ex-partner’s or co-owner’s share of the mortgage as part of the payment, it counts as compensation in the same way as cash and avoids TPO. It is one of the most effective ways of doing it. The part that surprises people is the bank: an agreement in the deed that you will take over the debt does not release the other person towards the lender. Without the bank’s signature there is no release. And if the bank does consent to releasing them, that consent is itself subject to AJD. I explain the mechanics in my guide to buying out a co-owner when there is a mortgage.
Common mistakes that cost money
An out-of-date reference value is the first. Check it on the day of signing, or at the latest before the deadline to file the tax return runs out.
The second is the ghost of a gift. If the reference value is higher than the compensation you agreed, the tax office could see a gift. This position is much disputed, but it is better to be protected. Match the compensation to the reference value, or pay AJD according to the proportion of the reference value you acquire, ideally with a clause stating that there was no intention to make a gift (animus donandi).
The third is the mortgage. Believing that taking on the debt in the deed frees the other person from the bank is a mistake. Without the bank’s signature, nothing is released.
Frequently asked questions
Is buying out a co-owner cheaper than selling the property to them?
In most cases, yes. A buyout with compensation lets you keep the home and save thousands of euros compared with a sale, because the deed is taxed as AJD instead of TPO and plusvalía can be avoided. It does need precision: the income tax issue and the gift risk caused by mismatches with the reference value are where people go wrong.
Can I pay the compensation by taking over my ex’s mortgage?
Yes, and it is one of the most advantageous ways. It works like a cash payment and avoids TPO. However, the bank’s consent to release the other person does not exempt the deal from AJD.
Can I compensate with another property instead of cash?
You can, although article 1062 of the Civil Code speaks only of money. Be aware of the cost: the person who receives your share pays TPO, and you pay plusvalía and income tax.
Can the compensation be paid later?
Yes, payment of the compensation can be deferred.
Get the tax design right before you sign
I have studied thousands of co-ownership dissolutions, and I work with clients in English. The notary will draft your deed, but the notary does not design your tax strategy. That is my job. If you want to check how your own buyout would be taxed before anything is signed, you can book a consultation with me.