To learn a bit more on the extinction of a usufruct in Spain, your multilingual lawyer in Marbella of WeLex would first like to define the so-called ‘usufructo’.
Definition of usufruct in Spain.
Usufruct is defined in the Spanish Civil Code by means of Article 467. The owner of a usufruct property in Spain should keep it in good shape unless the owner of the ‘bare-ownership’ (known as nuda propiedad) authorises otherwise.
Generically, the usufruct is the right to enjoy a property and the duty to preserve same.
What to do when an individual who owns the usufruct passes away
The extinction of a Spanish usufruct can be caused by the death of the usufructuary or if the deadline of the usufruct has been reached (in the event that it was a temporary usufruct).
In the case that the usufruct is registered at a Spanish land registry, the owner of the bare-ownership should sign the ‘Escritura de extinction de usufructo’ in front of a public notary, proving that the usufructuary has passed away.
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Of course, first the corresponding tax declaration has to be presented at Regional Inland Revenue in order to have success with registering the extinction of the usufruct title deed at the land registry.
Are there any tax liabilities in Spain at the time of the extinction of a usufruct?
At the time of the extinction of a usufruct, the tax liabilities in Spain can be classified depending on how the usufruct was acquired. The full ownership of property in Spain could have been divided by means of a purchase/sale transaction, or alternatively, by means of an inheritance or donation.
- A) Transfer tax, stamp duties (or VAT if applicable).
Transfer tax or vat declaration should be settled in the event that the ownership of the property was divided by a bare ownership and usufruct with a purchase sale transaction.
However, if this was not the case, than inheritance or donation tax would be applicable,
- B) Spanish Inheritance and Donation Tax.
An inheritance and donation tax declaration should be filed in the event that the usufruct was created by a non-valuable transaction, such as an inheritance or donation in Spain.