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Practical Income Manual 2020.

Extinction of usufruct and consolidation of ownership

USUFRUCT ON REAL ESTATE Personal Income Tax . Table IV
Extinction of usufructEffectUsufructuaryProprietary knot

Due to the death of the usufructuary if it is not successive (lifetime usufruct)(1)

Automatic consolidation of the domain in the owner node

Article 33.3.b) of the Personal Income Tax Law : It is estimated that there is no capital gain or loss in lucrative transfers due to the death of the taxpayer. Therefore, it is not taxed in Personal Income Tax

In the extinction of the usufruct and subsequent consolidation of the domain, the corresponding tax will be required according to the title of constitution of the usufruct.

  • For onerous transmission: You will be taxed by the Property Transfer Tax (ITP). The bare owner is required to pay a settlement for the value of the usufruct that enters his or her assets, which is the result of applying to the new value that the asset may have at the time of consolidation of ownership, the percentage that corresponded to the usufruct in the moment of dismemberment, for which the tax has not been paid. However, if the tax rate has changed since that moment, the new one in force at the time of consolidation is applied.
  • For lucrative transmission: You will be taxed by the Inheritance and Donation Tax (ISD) applying the average effective rate of the tax corresponding to the dismemberment of the domain, and depending on the value that the usufruct had at that time (at the time of the dismemberment of the domain).

Does not pay tax in Personal Income Tax due to consolidation . The owner who consolidates ownership will obtain real estate capital returns if he rents or transfers the property or allocation of real estate income (unless it becomes his habitual residence).

Due to expiration of the term for which it was established if it is for a term (temporary usufruct)

Automatic consolidation of the domain in the owner node

A capital loss is generated in the Personal Income Tax for the difference between the transfer value, which will be zero, and the acquisition value ( See acquisition value in the previous table of transmission of usufruct )
By resignation of the usufructuary

Consolidation of domain in the owner node

A capital gain or loss is generated in the Personal Income Tax for the difference between the transfer value and the acquisition value (See transfer and acquisition value in the transfer of usufruct)

The renunciation of an already accepted usufruct, even if it is pure and simple, will be considered for tax purposes as a donation from the usufructuary to the bare owner.

Abatement coefficients ( DT 9 of the Personal Income Tax Law ): They will not be applicable, to the extent that it would not be the transfer of a property element, but rather a waiver of a right, regardless of whether it entails the consolidation of full ownership in the bare owner.

When the usufruct is extinguished for reasons other than compliance with the term or the death of the usufructuary, the acquirer (the bare owner) must pay tax at the highest value resulting from the settlements that arise from:
  • The resignation of the usufructuary (legal transaction by virtue of which the usufruct is extinguished) which is considered a donation for tax purposes: You will be taxed by ISD for the concept of donation, or
  • The pending dismemberment of the domain (according to the title by which the usufruct was established), in some cases of inter vivos origin ( ITP ) and in others of mortis causa origin ( ISD , concept Successions).

Does not pay tax in Personal Income Tax due to consolidation . The owner who consolidates ownership will obtain real estate capital returns if he rents or transfers the property or allocation of real estate income (unless it becomes his habitual residence).

By meeting of usufruct and bare ownership in a single person for different reasons

Consolidation of ownership in the usufructuary or in the bare owner derived from a legal transaction (by donation or onerous transfer)

  • If the usufructuary transfers his right to the bare owner: You will obtain in Personal Income Tax a capital gain or loss for the difference between the transfer value and the acquisition value (See transfer and acquisition value in the transfer of usufruct)
  • If the usufructuary acquires bare ownership and consolidates ownership: The tax corresponding to the legal transaction by virtue of which the bare property is acquired will be required.

    • For onerous transmission: The consolidation will be taxed by the Property Transfer Tax (ITP).
    • For lucrative transmission: The consolidation will be taxed by the Inheritance and Donation Tax (ISD) for the concept of donation.

      In this case does not pay tax on Personal Income Tax due to consolidation but will obtain returns on real estate capital if it leases or transfers the asset or allocation of real estate income (except if it becomes your habitual residence)

  • If the bare owner transfers his bare ownership to a 3 (to the usufructuary): You will obtain in the Personal Income Tax a capital gain or loss for the difference between the transfer value and the acquisition value of the bare property.
  • If the bare owner acquires usufruct and consolidates ownership. The tax corresponding to the legal transaction by virtue of which the bare property was acquired will be required.

    • For onerous transmission: The consolidation will be taxed by ITP
    • For lucrative transmission: The consolidation will be taxed by ISD . The consolidation of the domain in the bare owner will be taxed for the largest of the liquidations: between that which is pending due to the dismemberment of the domain and that corresponding to the legal transaction by virtue of which the usufruct is extinguished.

      In this case, the bare owner who acquires the usufruct and consolidates the domain does not pay tax on Personal Income Tax due to the consolidation but will obtain returns on real estate capital if he rents or transfers the property or allocation of real estate income (unless it becomes your habitual residence)

Note to the box:

(1) The extinction of the usufruct due to the death of the usufructuary does not entail a new acquisition by the person holding the property, but rather it is the legal regime of this real right of enjoyment or enjoyment that establishes that the death of the usufructuary extinguishes it (article 513.1, Civil Code ), the owner recovering the powers of enjoyment of which he had been deprived in its constitution. (Back)

This table is for informational purposes only.