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V1003-19 8 May 2019 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · usufructo temporal

Donating property usufruct to children generates real estate capital income

A taxpayer inquired whether the donation of temporary usufruct of a property to their children has implications for Personal Income Tax (IRPF). The Directorate General for Taxes (DGT) ruled that the transaction generates real estate capital income, which must be valued at market price or, failing that, via imputed income.

The question raised

Taxation in the Personal Income Tax (IRPF) of the donation.

The DGT's ruling

The establishment of a usufruct over a dwelling generates income from real estate capital which must be valued at normal market price. However, if the gratuitous nature of the donation is proven, the net income may not be lower than the result of applying the rules of Article 85 of the Personal Income Tax Law. In the case of urban real estate, this entails applying 2 percent (or 1.1 percent depending on the case) to the cadastral value.

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