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V1945-22 13 September 2022 · SG de Impuestos Patrimoniales, Tasas y Precios Públicos Criterion in force
ITPAJD · consolidación del dominio

Improvements to a usufructuary asset are not subject to Inheritance Tax, but to Transfer Tax and Stamp Duty

A taxpayer asks whether the value of improvements made to a usufructuary estate must be included in Inheritance Tax following the death of the usufructuaries. The DGT responds that such improvements do not form part of the estate and must be taxed under Transfer Tax and Stamp Duty upon the consolidation of ownership.

The question raised

Question posed: During the 23 years of the usufruct, the usufructuaries carried out investments and improvements on the usufructuary estate, converting dryland arable land into irrigated olive groves. The taxpayer asks whether they would be obliged, or not, to include within the estate an independent item representing the value of the installations and improvements made to the plot, for the purpose of including them in the pending Inheritance Tax proceedings.

The DGT's ruling

The death of the usufructuaries extinguishes the usufruct and consolidates ownership in the bare owner. As this constitutes a dismemberment of ownership by onerous title, the consolidation is taxed under Transfer Tax and Stamp Duty on the value of the assets at the time of consolidation, including improvements or installations. Therefore, these improvements do not form part of the inheritance and are not subject to Inheritance Tax.

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