Usufruct and Bare Ownership in Spain: How They Are Valued and Taxed

What a usufruct actually is in Spanish law

Article 467 of the Civil Code defines usufruct as the right to enjoy property belonging to another with the obligation to preserve its form and substance, unless the deed creating it or the law says otherwise. Everything else follows from that sentence. The usufructuary lives in the flat, rents it out, collects the rent and behaves in every practical sense like the owner; what they may not do is change what the thing is — knock the villa down, sell the land, turn a home into a warehouse. The bare owner, meanwhile, owns an asset they cannot touch, and waits.

A usufruct can be created in four ways (art. 468 CC): by operation of law, by a lifetime act, by will, and by prescription. The two that matter on the Costa Blanca are the last two but one. Spanish succession law itself hands the surviving spouse a usufruct over part of the estate, which is why so many inheritance deeds split ownership without anyone having planned it. And a donation with reservation of usufruct is the classic lifetime arrangement: the parents give the children the bare ownership of the apartment and keep the right to live in it until they die.

The usufruct may cover all or part of the fruits of a thing, may be held by one person or several, simultaneously or successively, may start or end on a fixed date, and may be conditional (art. 469 CC). It may even be granted over a right, provided the right is not personal or untransferable. The rights and duties of the parties are, first of all, whatever the deed says; the Civil Code steps in only where the deed is silent or incomplete (art. 470 CC). That single point is worth more than any tax planning: a well-drafted usufruct clause prevents most of the family arguments that end up in a Spanish court.

What the usufructuary may do — and what it costs them

The usufructuary is entitled to every natural, industrial and civil fruit of the property (art. 471 CC). For an apartment that means the rent, and civil fruits are deemed to accrue day by day, belonging to the usufructuary in proportion to how long the usufruct lasts (art. 474 CC). They may occupy the property themselves, let it to a tenant, or even transfer their usufruct to a third party, including by gift — but every contract they sign as usufructuary falls away when the usufruct ends (art. 480 CC). A tenant who signs a five-year lease with a usufructuary of 84 should read that article carefully.

The costs follow the enjoyment. Ordinary repairs are on the usufructuary: those caused by normal wear and indispensable to the preservation of the thing, and if they fail to do them after being asked, the owner may do them at the usufructuary’s expense (art. 500 CC). Annual charges and taxes that are effectively a levy on the fruits are also theirs for as long as the usufruct lasts (art. 504 CC), and so are the costs and legal fees of any litigation about the usufruct itself (art. 512 CC). In practice this is the line that decides community fees, utilities, the annual IBI receipt and routine maintenance.

The usufructuary may make useful or ornamental improvements provided they do not alter the form or substance of the property, but there is no right to compensation for them; they may only remove them if that can be done without damaging the property (art. 487 CC), and they may set off deterioration against the improvements they have made (art. 488 CC). They must also warn the owner of any third-party act that could injure the ownership, and answer for the damage if they stay silent (art. 511 CC).

What the bare owner keeps — and what they have to pay for

The bare owner is a real owner with a suspended right of enjoyment. They may sell the property (art. 489 CC) — what they sell is the property burdened with the usufruct, which is not the same thing as selling a free apartment — but they may not alter its form or substance, nor do anything that harms the usufructuary. They may also carry out works and improvements on the property, provided this neither reduces the value of the usufruct nor prejudices the usufructuary’s right (art. 503 CC).

Extraordinary repairs are on the owner (art. 501 CC), and the usufructuary must warn them when such a repair becomes urgent. If the owner pays for them they may demand from the usufructuary the legal interest on the sum invested for as long as the usufruct lasts (art. 502 CC). If the owner refuses to make repairs that are indispensable for the survival of the thing, the usufructuary may make them and claim, at the end of the usufruct, the increase in value the property gained from those works — and may retain the property until they are paid.

Charges imposed directly on the capital during the usufruct are the owner’s (art. 505 CC), with a matching interest rule in both directions: if the owner pays them the usufructuary owes interest on the sums advanced, and if the usufructuary advances them they are reimbursed at the end. Read together with art. 504, this is the Civil Code’s answer to the question every family asks — the person who enjoys pays for the running of the property, the person who owns pays for its structure.

Inventory and security: the step almost everyone skips

Before taking possession, the usufructuary must do two things (art. 491 CC): draw up an inventory of the assets, with the owner or their representative summoned, having the movables valued and describing the condition of the immovables; and post security undertaking to comply with their obligations. The inventory is not bureaucracy for its own sake. It is the document that decides, years later, whether the kitchen was already in that state or whether the usufructuary let it rot.

The security requirement does not apply to a seller or donor who reserved the usufruct of what they sold or gave away, nor to parents who are usufructuaries of their children’s assets, nor to the surviving spouse in respect of the statutory usufruct share, unless they remarry (art. 492 CC). And any usufructuary, whatever the title, can be released from the duty to make an inventory or post security when nobody is prejudiced by it (art. 493 CC). Where security is due and not given, the owner can ask for the property to be put under administration and the movables sold or deposited (art. 494 CC), which is a real risk in a contested family succession.

How a usufruct ends — and the renunciation trap

Article 513 of the Civil Code lists seven ways a usufruct ends: the death of the usufructuary; expiry of the term or fulfilment of a resolutory condition set in the deed; the meeting of usufruct and ownership in one person; renunciation by the usufructuary; total loss of the thing; termination of the right of the person who created it; and prescription. If the thing is only partly lost, the usufruct continues over what remains (art. 514 CC). A usufruct in favour of a town, corporation or company cannot be created for more than thirty years (art. 515 CC).

Two of those seven have tax consequences most people do not expect. The third, the reunion of usufruct and ownership in the same hands, is the consolidation of ownership, and it is the subject of a whole section below. The fourth, renunciation, looks like the cheap and friendly way out — the widow no longer wants the burden, so she signs a renunciation and the children get full ownership. Tax law does not see it that way: the renunciation of a usufruct already accepted, even a pure and simple one, is treated for tax purposes as a gift from the usufructuary to the bare owner (art. 51.6 of the ISD Regulation and art. 41.6 of the ITP Regulation).

That reclassification matters because a gift between a mother and a child is taxed under gift rules, with the reductions and rebates of the autonomous community involved and none of the treatment an inheritance would have received. A renunciation made before accepting the usufruct is a different legal act with a different analysis, which is precisely why the decision should never be taken at the counter of a notary’s office without advice.

The valuation rule: the arithmetic at the centre of everything

Here is the rule, and it is short. Article 26.a of Ley 29/1987 on Inheritance and Gift Tax says the value of a temporary usufruct is deemed proportional to the total value of the assets, at the rate of 2% for each period of one year, without exceeding 70%. For life usufructs, the value is deemed equal to 70% of the total value of the assets when the usufructuary is under twenty years old, decreasing as age increases in the proportion of 1% less for each additional year, with a minimum limit of 10% of the total value. The value of the bare ownership is computed as the difference between the value of the usufruct and the total value of the assets. Article 10.5.a of the consolidated Transfer Tax Act (RDLeg 1/1993) repeats the same words for ITP and stamp duty, and article 20 of the Wealth Tax Act sends you back to those same rules.

Worked as arithmetic, the life rule is: percentage of the usufruct equals 89 minus the age of the usufructuary in completed years, then capped at 70 and floored at 10. Someone aged 20 has a usufruct worth 69%, someone aged 65 has 24%, and anybody aged 79 or more has the statutory minimum of 10%. The temporary rule is 2% per year of term, so a ten-year usufruct is worth 20% and any term of 35 years or more hits the 70% ceiling. Fractions of a year are ignored, although a usufruct for less than one year is still counted at 2% (art. 49.a of RD 1629/1991 and art. 41.1 of RD 828/1995). Where a life usufruct is also temporary, the bare ownership is valued under whichever of the two rules gives it the lower value.

Two details save arguments. First, the base to which the percentage applies is not a number the family chooses: for immovable property the taxable base is the Catastro reference value at the accrual date, and if the declared value or the price agreed is higher, the higher figure is taken (art. 10.2 TRLITPAJD; the same reference value governs inheritance and gift tax). Second, when the usufruct is granted to a legal person the treatment changes — a term of more than thirty years or an indefinite term is treated for tax as a transfer of full ownership subject to a resolutory condition (art. 10.5.a TRLITPAJD), and the ISD Regulation caps such a usufruct at 60% of the total value (art. 49.d).

The rule for rights of use and habitation is derived from the same table: their value is what you get by applying the temporary or life usufruct rules, as the case may be, to 75% of the value of the assets they burden (art. 26.b LISD, art. 10.5.b TRLITPAJD). A right of habitation granted for life to a person of 65 is therefore worth 24% of 75% of the property value, which is 18%.

Two worked splits: the widow of 70 and the donor of 62

Scenario one, the inheritance. A husband dies leaving an apartment in Orihuela Costa and a widow aged 70. She takes the usufruct, the two children take the bare ownership. Her usufruct is worth 89 − 70 = 19% of the value of the property; the children divide 81% between them. She is taxed on 19%, they are taxed on 81%, and the two figures together are the whole apartment. Nothing has been given away and nothing has been hidden: the split is purely a valuation convention that the law imposes on everyone alike.

Scenario two, the lifetime gift. A father of 62 gives his daughter the bare ownership of the flat and keeps the usufruct for life. His usufruct is 89 − 62 = 27%; the daughter receives 73%, and that 73% is the taxable base of her gift tax return. The rate she pays, however, is not the rate corresponding to 73% of the value: article 26.a of the ISD Act closes that door by requiring the average effective rate of tax that corresponds to the whole value of the assets to be applied to the reduced base, and the Regulation spells out the calculation — the notional tax on a theoretical taxable base computed on the full value, divided by that same base, times 100, expressed with up to two decimals (art. 51.2 of RD 1629/1991).

The consequence is worth stating plainly, because it is the single most misunderstood point in the whole subject. Splitting ownership reduces the base each party declares; it does not, by itself, reduce the rate. And the 27% the father kept has not disappeared from the tax system: it is parked, and it will be taxed in his daughter’s hands the day he dies. The saving of a lifetime gift with reserved usufruct, where there is one, comes from freezing values and from the regional reductions in force, not from the split itself.

Consolidación del dominio: the tax bill that arrives years later

When the usufructuary dies, the usufruct is extinguished (art. 513.1 CC) and the bare owner becomes full owner without anyone signing anything. No asset changes hands and no money moves, which is exactly why the tax comes as a shock. Article 26.c of the ISD Act provides that on the extinction of the usufruct the tax is charged according to the title under which the usufruct was created, applying the average effective rate of tax corresponding to the dismemberment of ownership. The Regulation adds the mechanics: the first bare owner must pay on the value attributed to the usufruct when it was created, reduced where a family reduction was not exhausted at the first liquidation, and at that same average effective rate (art. 51.2 of RD 1629/1991).

Read that twice. The percentage taxed is the percentage never settled, the value used is the one fixed at the moment the ownership was split, and the rate is the one derived from the original title — the inheritance from the father, or the gift from the mother — not from the death of the usufructuary. Nothing about the second event depends on what the property is worth today. The devengo rule confirms it: an acquisition whose effect was suspended by a limitation is deemed to take place on the day the limitation disappears (art. 24.3 LISD).

The picture is different where the split was made for consideration rather than by inheritance or gift. If the bare ownership was bought and taxed under ITP, then on consolidation by expiry of the term or death of the usufructuary the bare owner is taxed, under the same heading and title by which they acquired, on the percentage on which tax was not paid, and that percentage is applied to the value the assets have at the moment of consolidation and at the rate in force at that moment (art. 42.2 of RD 828/1995). Where the consolidation happens for some other reason, the bare owner pays the higher of that liquidation and the one corresponding to the transaction that extinguished the usufruct (art. 42.3; art. 51.4 of the ISD Regulation says the same for lucrative splits).

Deadlines and venue are set out with unusual clarity. The filing window is six months from the death of the usufructuary, and the ISD Regulation says expressly that this six-month term applies to acquisitions of the usufruct pending the death of the usufructuary even where the dismemberment of ownership was carried out by a lifetime act (art. 67.1.a of RD 1629/1991). The return goes to the same office that dealt with the deed in which the usufruct was created (art. 72.3). Where two usufructs run in favour of both spouses simultaneously, only one consolidation liquidation is made, on the death of the last of them (art. 51.5).

The surviving spouse’s usufruct in a Spanish succession

Spanish forced-heirship rules give the surviving spouse a usufruct whose size depends on who else inherits. Where the spouse was not legally or de facto separated at the death and concurs with children or descendants, they are entitled to the usufruct of the third of the estate reserved for improvement — the tercio de mejora (art. 834 CC). Where there are no descendants but there are ascendants, the surviving spouse is entitled to the usufruct of one half of the estate (art. 837 CC). Where there are neither descendants nor ascendants, the usufruct extends to two thirds of the estate (art. 838 CC). If separated spouses had a reconciliation notified to the court or the notary who handled the separation, the survivor keeps their rights (art. 835 CC).

This is why so many Spanish inheritances end up with the split even when nobody intended it: the widow’s share of the estate is expressed as a usufruct, and a usufruct over an undivided estate becomes, in practice, a usufruct over the apartment. The value of that usufruct for inheritance tax purposes is calculated with exactly the rule set out above, using her age at the date of death, and the children are taxed on the bare ownership. Where a will attributes the right to enjoy all or part of the estate temporarily or for life, whatever it is called, tax law treats it as a usufruct and values it under the same rules (art. 26.e LISD, art. 52 of the ISD Regulation).

Two anti-avoidance presumptions in article 11 of the ISD Act are worth knowing before designing anything clever. Assets acquired in the three years before the death where the deceased bought the usufruct and an heir, legatee, relative within the third degree or spouse bought the bare ownership are presumed to form part of the estate (art. 11.b). So are assets transferred by the deceased in the four years before death where they reserved the usufruct of those or other assets, or any other lifetime right (art. 11.c). Both presumptions admit proof to the contrary, but they mean an operation designed purely to move value out of the estate shortly before a death rarely works.

Commuting the widow’s usufruct

A usufruct held by a stepmother over a flat the children own is a recipe for deadlock, and the Civil Code offers an exit. Under article 839 CC the heirs may satisfy the spouse’s share of the usufruct by assigning them a life annuity, the yield of specified assets, or a capital sum in cash, acting by mutual agreement or, failing that, by court order. Until that is done, all the assets of the estate are charged with payment of the spouse’s share of the usufruct.

Where the surviving spouse concurs with children of the deceased alone — the classic second-marriage case — the spouse may require that their usufruct be satisfied, at the children’s election, by the assignment of a capital sum in cash or a lot of estate assets (art. 840 CC). Commutation is a real transaction with its own tax analysis for each party, and its cost has to be compared with the cost of leaving the usufruct in place and paying the consolidation later. It is a conversation to have with an adviser before the estate is distributed, not after, because once the deed of partition is signed the cheap options are gone.

Modelo 210: the usufructuary files, not the bare owner

For non-resident individuals, the imputed income of real estate situated in Spain is determined under the IRPF rules on imputation of real estate income (art. 24.5 of the consolidated Non-Resident Income Tax Act, RDLeg 5/2004). Those rules impute the income to the holders of the property, and then add the sentence that settles our question: where rights of enjoyment in rem exist, the income computable in the holder of the right is the income that would correspond to the owner (art. 85.2, second paragraph, of Ley 35/2006). The usufructuary is a holder of a right of enjoyment in rem. The imputation is theirs, in full, not apportioned by percentage.

The practical consequence is that the widow with the usufruct files modelo 210 for imputed income on the whole apartment, and the children with the bare ownership file nothing for that property while the usufruct lasts. The same logic governs actual rent: if the property is let, the rental income is a fruit of the property and belongs to the usufructuary (art. 471 CC), so it is the usufructuary who declares it. Rates are the ordinary non-resident rates — the general 24%, reduced to 19% for residents of another EU member state or of an EEA state with effective exchange of tax information (art. 25.1.a TRLIRNR) — and EU and qualifying EEA residents may deduct expenses directly and inseparably linked to the income obtained in Spain (art. 24.6 TRLIRNR).

Getting this wrong is common and expensive in both directions. Children who dutifully file modelo 210 on a bare ownership they cannot use are paying tax that is not theirs; a usufructuary who files nothing because “the flat belongs to the kids now” is accumulating unfiled years with surcharges and interest. If the split has been in place for a while and the filings went to the wrong person, the fix is a regularisation, and doing it before the Tax Agency writes is materially cheaper.

IBI and the town hall: the usufruct outranks the title

The taxable event of the IBI is the holding of one of four rights over the property, listed in this order: an administrative concession, a surface right, a right of usufruct in rem, and the right of ownership (art. 61.1 TRLRHL). The order is not decorative. Article 61.2 provides that realising the taxable event that comes first in that list means the property is not subject to the remaining ones, and article 63.1 makes the taxpayer whoever holds the right that constitutes the taxable event in each case. A usufruct sits above ownership on the list, so where a usufruct exists the taxpayer for IBI is the usufructuary.

That is why the SUMA or town-hall receipt arrives in the widow’s name and why the direct debit should be set up on her account, not the children’s. It also matters for the tax-affection rule on transfers: on any change of ownership of the rights that constitute the taxable event, the property remains affected to payment of the outstanding IBI debts (art. 64.1 TRLRHL), so an unpaid receipt in a split ownership can surface at the worst possible moment. Nothing in this section touches rates, coefficients or rebates: those live in each ayuntamiento’s ordenanza fiscal, they change every year, and the only reliable figure is the one on your own receipt.

Wealth tax: two taxpayers, one property

Non-residents are liable to Spanish wealth tax by real obligation on the assets and rights located in Spain, and a Spanish property is such an asset. The valuation of the split follows the same road as everything else: article 20 of Ley 19/1991 provides that rights of enjoyment in rem and bare ownership are valued according to the criteria of the Transfer Tax Act, taking as a reference, where applicable, the value assigned to the corresponding asset under the wealth tax rules. Those rules value urban and rural property at the highest of three figures: the cadastral value, the value determined or verified by the administration for other taxes, and the price or value of acquisition (art. 10.One).

In practice that means one property produces two wealth-tax positions. The usufructuary declares the percentage that corresponds to their age under the article 26 table, applied to the property value determined under article 10; the bare owner declares the remainder. Both figures are recalculated each year for the usufructuary’s current age only where a new right is created — an existing life usufruct is not revalued annually by ageing the holder, and any planning that assumes otherwise should be checked against the specific facts. The exempt minimum, the tariff and the rebates are State and regional matters that our wealth tax guide covers; here the point is simply that the split does not remove the property from wealth tax, it divides it.

Selling a property with a live usufruct

The bare owner may sell what they own (art. 489 CC) and the usufructuary may transfer their usufruct (art. 480 CC), but neither of them alone can deliver a free apartment to a buyer. A buyer who wants full ownership needs both signatures in the same deed, and a buyer who buys only the bare ownership is buying a property they cannot occupy until the usufructuary dies — a real market, at a real discount, but a small one. This is why sales of split properties on the Costa Blanca almost always take the form of a single deed with the widow and the children all appearing.

The price is then apportioned between them. There is no rule that forces the parties to use the article 26 percentages to divide the money, but using anything else invites a discussion with the tax authority about whether part of the price was really a gift from one family member to another, so the statutory split is the safe default and any departure from it needs a reason on paper. Each party then computes their own capital gain: the difference between their acquisition value and their transfer value (arts. 34 and 35 of Ley 35/2006). Where the asset was acquired by inheritance or gift, the acquisition value is the one resulting from the inheritance and gift tax rules, capped at market value (art. 36).

For non-resident sellers the capital gain is taxed at 19%, without distinction between EU and non-EU residents, because the gain falls under the specific rate of article 25.1.f.3 of the TRLIRNR rather than the general rate. The buyer must also withhold and pay over 3% of the agreed consideration on account of the sellers’ tax (art. 25.2 TRLIRNR), and where several non-resident sellers appear in the deed the retention has to be split and reported for each of them. Both the widow and the children are sellers for this purpose.

Expensive mistakes, and what is State law versus regional law

Three mistakes account for most of the damage an adviser sees. The first is giving the bare ownership to the children and treating the matter as closed: the percentage retained by the donor was never taxed, and it will be taxed on their death under article 26.c of the ISD Act, at a rate derived from the original gift and with a six-month clock nobody is watching. The second is filing modelo 210 in the name of the bare owner because they are “the owners now”; the imputation belongs to the usufructuary under article 85.2 IRPF, and years of returns in the wrong name have to be unwound. The third is valuing the usufruct by what it would fetch on the market, or by some rule of thumb heard at a bar in Jávea: the tax value of a usufruct is the statutory percentage in article 26.a LISD and article 10.5.a TRLITPAJD, applied to the reference value of the property, and no other figure is admissible.

A fourth deserves its own line: renouncing a usufruct that has already been accepted to “tidy things up”. That is a gift from the usufructuary to the bare owner for tax purposes (art. 51.6 of the ISD Regulation), taxed as such, and it can cost several times what waiting would have cost.

Finally, the boundary that decides how much any of this costs. The valuation percentages, the consolidation mechanism, the imputation rules and the IBI ranking are all State law and apply identically in Torrevieja, Bilbao and Seville. The reductions, allowances and rebates in inheritance and gift tax are regional, they vary enormously between autonomous communities, and they change from one budget law to the next — which is why no figure of that kind appears anywhere in this guide. For the Comunidad Valenciana position read our inheritance tax guide for the region, and run your own numbers through the usufruct calculator before you sign anything.