When settling accounts in the division of assets in divorce and inheritance proceedings, "tornas" or returns are paid by a party to compensate another.
Returns follow legal procedures that are crucial to understand when it comes to sharing assets. If it is necessary to make or receive this compensation, it is also essential to consider the tax obligations that must be met. Returns are always associated with immovable property, such as houses, plots of land, works of art, among others).
Shares or returns: what's the difference?
It's important to start by emphasising that you shouldn't confuse shares with returns, because there are differences between the two concepts.
Returns are the monetary retribution that, in divorce or inheritance proceedings, the beneficiary symbolically compensates the other party or parties involved for having been left with more valuable property.
When we talk about a share, we mean the equal distribution of assets between all parties. To this end, the property is valued and divided into equal parts.
Returns in the event of inheritance
In the division of inherited assets, it may also be necessary to resort to returns if one of the parties receives more than their share. This situation can occur, for example, when there is an equal distribution of assets between siblings and one of them ends up receiving a property of greater value than the others.
When one of the heirs receives a larger share than is due, they are obliged to pay the other heirs returns, usually in cash.
For example: three sisters inherit €600,000 in works of art, two own a gallery and want to keep their late father's estate. The third sister was reimbursed with a return of €1,000, i.e. the third sister was compensated in monetary terms on the assets that the father had in his possession.
Returns in the event of divorce
In the event of divorce, the spouses have the option of dividing their assets through a division agreement or, in the absence of consensus, resorting to inventory proceedings.
However, it may happen that one spouse receives assets of greater value than the other. When this happens, unless the wronged spouse waives this right, the need arises for the compensation known as "torna" or return.
For example: a couple gets divorced and has a property, one of the spouses is able to continue paying the instalment. They decide, by mutual agreement, that whoever gets the house will give monetary compensation (return) to the other.
How are returns taxed?
- Returns are income for both the recipient and the payer;
- Both must declare it to the IRS;
- Those who receive, declare in Annex G, those who pay, declare in Annex H;
- Returns are subject to IMT(Municipal Property Transfer Tax), the state decreed in 2022;
- Each beneficiary will pay IMT for the difference between what they were entitled to receive and what they actually received.
Renouncing returns
When a return is renounced, from a tax point of view it is a donation that is subject to Stamp Duty at a rate of 10%. Payment of this amount is the responsibility of the person who received the donation.
Returns may be renounced for various reasons:
- As an amicable agreement between the parties involved, in order to avoid disputes or misunderstandings;
- By simple personal decision of one of the parties, who may not want to receive the financial compensation.
It is important to note that the renunciation of returns must be done voluntarily and consciously, often involving the signing of legal documents to formalise the decision. Before making any decision regarding the waiver of returns, it is advisable to consult a lawyer.
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