Have you inherited a home from your spouse as a usufructuary? Don’t you know how to file your income tax return? It is quite common for a person to inherit the usufruct of the habitual residence in which they lived with their spouse and the children inherit the bare property. This situation generates many doubts when preparing the income tax return. In this article we are going to analyze what a usufructuary is and how this situation is declared in the Income Tax.
What is usufruct?
In relation to the ownership of a property (such as a home), several rights are generated:
– The right of use, that is, the use of the home.
– The right of enjoyment, that is, to receive the fruits produced by the home, in the sense, for example, of the rental income if the property is rented.
– The right to dispose of the property through operations such as sale or donation, for example.
Usufruct is regulated in articles 467 et seq. of the Civil Code, which defines it as follows:
Usufruct gives the right to enjoy the property of others with the obligation to preserve its form and substance, unless the title of its constitution or the law authorizes otherwise.
The Catalan Civil Code also defines usufruct in section 2 of article 561-2 as follows:
Usufruct is the real right to use and enjoy other people’s property, preserving its form and substance, unless the laws or the title of constitution establish otherwise.
Therefore, usufruct gives the usufruct right to use and enjoy the home and bare ownership gives the power to dispose of the property, in such a way that usufruct is the right to use and enjoy a certain asset.
Personal income tax declaration and usufruct
The general rule is that all people who receive income must prepare an income tax return, but only those people who exceed an annual income limit are required to file it. IRPF is the tax that natural persons residing in Spain must pay for the benefits or income they have obtained throughout the fiscal year. The concept of benefits and income includes income derived from work as an employee (salary), income derived from self-employment (economic activity of the self-employed), income that comes from public benefits such as pensions and aid, and income derived from real estate capital (income derived from a rental) and those derived from real estate capital (shares and participations in commercial companies), among others.
In the case of constitution of usufruct over real estate, article 22 of the Personal Income Tax Law, which regulates returns on real estate capital, establishes that:
1. They will be considered full income from the ownership of rural and urban real estate or real rights that fall on them, all those derived from the lease or the constitution or transfer of rights or powers of use or enjoyment over them. , whatever its name or nature.
2. The amount that the acquirer, assignee, lessee or sublessee must pay for all concepts will be computed as full income, including, where applicable, the amount corresponding to all those assets transferred with the property and excluding the Value Added Tax or , if applicable, the Canary Islands General Indirect Tax.
On the other hand, when the usufruct is established free of charge (which is usual), that is, without any consideration from the usufructuary, a series of specific rules apply, which are the following:
– The provision of goods, rights or services capable of generating returns on work or capital are presumed to be remunerated, unless proven otherwise.
– The constitution of a usufruct right, for life or temporary, over a property in favor of a spouse or relative, generates a return on real estate capital that must be valued at a normal market price.
– The yield may not be lower than that indicated in article 85 of the Personal Income Tax Law: In the case of urban real estate (…) as well as in the case of rural real estate (…), it will be considered Imputed income is the amount resulting from applying 2 percent to the cadastral value, determined proportionally to the corresponding number of days in each tax period. In the case of properties located in municipalities in which the cadastral values have been reviewed, modified or determined through a general collective valuation procedure, in accordance with the cadastral regulations, and have come into force in the tax period or in the term of the ten previous tax periods, the percentage will be 1.1 percent.
How does the usufructuary declare real estate in the Income Tax?
If you are the usufructuary of a property and consult your tax data to file your income tax return, you will see that the properties appear both for you and for the person who has bare ownership. These data identify the property by its cadastral reference and its cadastral value and indicate the part that corresponds to the usufructuary and the bare owner.
In relation to usufruct and income, several situations can arise with a property:
– The usufruct of the property is attributed to a person by inheritance, but the inheritance has not yet been distributed. If the property is rented, each heir must declare the income produced by the property (rental income) in equal parts until the deed of division of the inheritance is signed.
– The usufruct of the property is held by a person who has rented the property. If the usufructuary receives the fruits (income) of the property, he must declare them in the income as a return on real estate capital.
– The usufruct of the property belongs to a person who keeps said property empty. In this case, the usufructuary has the home empty and at his disposal and must declare 2% of the cadastral value of the property in the income for the imputation of real estate income. If the value is registered after January 1, 2004, the percentage to apply is 1.1%. This rule also applies to those properties that, on the date of tax accrual, do not have a cadastral value or said value has not been communicated to the owner.
– The usufructuary uses the property as his habitual residence and does not receive any income. In this case, the usufructuary will be exempt from paying personal income tax for the usufruct.
It may also happen that the usufructuary sells the usufruct in exchange for a price. In this case, you must include the profit you have obtained in your income tax return and pay taxes on it.
Another assumption that may arise is that the usufruct is constituted by securities, that is, shares or participations in a commercial company. In that case, the usufructuary must pay tax on the income obtained from movable capital by application of article 25.1 of the Personal Income Tax Law. In short, it is necessary to know the situation of the usufructuary to see how he will declare the Income and to have the help of expert real estate advisors who study the case.
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