The Supreme Court has ruled in three judgments dated 18 May 2020 on the taxation of a contribution of mortgaged real estate to a company that assumes the outstanding debt, concluding that there are two different taxable events.
According to the ITP-AJD law, the incorporation of a company through the contribution of real estate is subject to and exempt from ITP-AJD in its corporate operations modality, however, the controversy arose when said real estate was encumbered with a real estate mortgage that the company assumed.
The Supreme Court creates jurisprudence by concluding that in the event that the properties are mortgaged, the company assumes the outstanding debt, we would be dealing with two different conventionson the one hand, a company formation transaction subject to the company operations and another operation of allotment in payment of debt assumptionsubject to the modality transfer of property for valuable consideration for immovable property that is surrendered upon assumption of the mortgage debt encumbering it.
The High Court considers that in the present case there are ".two indicators of economic capacity perfectly identifiable: the contribution of the properties "at their net value" (i.e. net of the outstanding debt) and the assumption of the debt for the mortgage loan still encumbering the properties contributed".
The Court therefore concludes as indicated, i.e. that the incorporation of a company by contribution of mortgaged propertywhen the assumption of the outstanding mortgage debt takes place, it implies the existence of two conventions, subject to to "corporate transactions" and "transfer of assets for consideration".
