Buying a Property with Mortgage Subrogation? Know Your Tax Rights!

Mortgage subrogation means the buyer takes over the seller’s mortgage loan instead of starting a new mortgage.According to the Spanish Tax Authority (DGT), this subrogation is not subject to the Actos Jurídicos Documentados (AJD) stamp duty tax on notarized documents.

Why? Because only one registration entry occurs at the Property Registry — the property transfer. The mortgage subrogation does not create a separate registrable deed.

This ruling contrasts with a 2020 Supreme Court decision that confirmed AJD tax applies when co-ownership ends and a co-debtor is released.

Therefore:

• If the mortgage subrogation happens as part of a normal purchase, AJD tax does not apply on the subrogation itself.

• If co-ownership with a co-debtor is extinguished, AJD tax does apply.
  
  The DGT also clarifies the VAT reverse charge mechanism may apply, meaning buyers “self-charge” the VAT to ease upfront payments.

This guidance brings greater legal certainty and avoids unexpected tax costs in common real estate transactions.

For expert legal help with mortgage subrogation and property tax issues, reach out to CB Legal Services