How are profits shared in a co-ownership (“comunidad de bienes”)?

Question

José Manuel Alburquerque · Accepted Answer

First, in whatever way the co-owners (“comuneros”), who are the members of the co-ownership, have agreed. If there is no agreement, the “Código Civil de Cataluña”, the Catalan Civil Code, divides the fruits and income, such as rent, in proportion to each person's share, which is presumed to be equal unless the contrary is proved. Expenses are shared in the same proportion. If one of the co-owners collects money on their own account, they must account to the others and hand over what is due to them. As far as the tax authorities are concerned, it is not the co-ownership that pays income tax but each co-owner, who declares their share in their own tax return. How it is shared between the co-owners The Catalan code lets the co-ownership be governed first and foremost by what its members agree. If they have not agreed anything, these rules apply: The fruits and income of the asset, such as rent or interest, belong to each co-owner in proportion to their “cuota”, which is the share they hold in the co-ownership. Unless otherwise proved, the shares are presumed to be equal. The expenses needed to preserve the asset, use it and earn income from it are paid in the same proportion, as are improvements agreed by the majority. If one of the co-owners collects money on their own account, for example because the tenants pay them, they must account to the others in the same way as someone who manages other people's property and hand over their share. How to claim it from them if they do not is another matter. If the co-ownership runs a business and in reality operates as a partnership, in the absence of an agreement each member shares in the profits and losses in proportion to what they contributed. An agreement that leaves a co-owner with no share at all in the profits or the losses is void, although a person who contributes only their work can be exempted from the losses. In most of the rest of Spain, the Spanish Civil Code (“Código civil”) also divides the benefits and burdens of the co-ownership in proportion to the shares, which it presumes to be equal. What is declared to the tax authorities The co-ownership does not pay income tax. Its income is attributed to each co-owner, who declares it in their income tax return according to its nature, as income from property if it comes from letting or as income from an economic activity if it comes from a business. This is known as the income attribution regime (“régimen de atribución de rentas”). The income is attributed according to the agreements or the applicable rules. If the tax authorities have no reliable evidence of those agreements, for example in a deed, the income is attributed in equal parts. A split that differs from the shares may have tax consequences, which should be reviewed before it is agreed. Every year, in January, the co-ownership files an information return, Form 184, showing what corresponds to each co-owner. It does not have to file it if it does not run any business and its income does not exceed 3.000 euros a year. For example, three siblings own commercial premises, one with 50 % and the other two with 25 % each. They let the premises for 1.200 euros a month, which is 14.400 euros a year. From that amount they can deduct certain expenses, such as the insurance on the premises or the IBI, which is the municipal tax on properties. If these come to 2.400 euros, the net income, what is left of the rent after those expenses, is 12.000 euros. The first sibling declares 6.000 euros and each of the other two declares 3.000. If the tax authorities had no reliable evidence of those shares, 4.000 euros would be attributed to each of them.