Contribution of a property with a mortgage

When a company increases its share capital, it is not subject to Transfer Tax (remember that for years, capital increases have been exempt from this tax).

However, be aware that if the capital is increased by contributing a mortgaged property and the company assumes the mortgage loan, the company will indeed have to pay Transfer Tax (between 6 and 13%, depending on the autonomous community).

This is because, when a mortgaged property is contributed, two different operations are carried out:

• Capital increase . On one hand, the capital increase, which is carried out for the part of the property value that the company receives "freely" (i. e., for the part that exceeds the amount of the mortgage loan assumed by the company). This operation is exempt from Transfer Tax .

• Assumption of debt . And on the other hand, the assumption by the company of the mortgage debt of the partner contributing the property , which, being a second transfer (the property was first acquired by the partner), is subject to Transfer Tax as if it were a sale (in this case, the taxable base for Transfer Tax is the debt assumed by the company).

Also, keep in mind that if the contributed property has increased in value since its acquisition, the partner making the contribution may be required to pay Capital Gains Tax for the capital gain generated (difference between the value at which the property is contributed to the company and its acquisition value). In addition, for this transfer, the partner may also have to pay municipal capital gains tax.

 

If you are considering increasing the share capital of your company, contact us. We will advise you on the taxation of these types of operations and the best way to carry them out.