Personal Income Tax exemption for the donation of bare ownership of the primary residence

Succession planning and the transfer of real estate often raise frequent questions regarding the tax burden under Personal Income Tax (IRPF). One of the most relevant issues is the tax treatment of the donation of bare ownership when the owner retains the usufruct of their primary residence.

What the DGT has ruled

The Dirección General de Tributos (DGT) has clarified the conditions for applying the exemption provided for in current regulations. The donation of bare ownership constitutes a transfer that generates a capital gain or loss, calculated as the difference between the acquisition value and the transfer value. However, if the donor is over 65 years old and the property constitutes their primary residence, the capital gain derived from this operation will be exempt from taxation.

For this exemption to be applicable, specific requirements regarding the property must be met:

• The building must have been the donor's primary residence on the date of the transfer.
• Alternatively, it must have functioned as the primary residence at any time during the two years prior to the date of the donation.

What it means for you

This criterion has a direct impact on individuals over 65 who opt to donate the bare ownership of their residence while maintaining the right of use by reserving the usufruct. If the age and housing use requirements are met, the donor will not have to pay tax on the capital gain resulting from the operation in their income tax return.

What you should do

In an operation of this type, it is necessary to verify that the temporal requirements for the primary residence and the donor's age are strictly met. It is fundamental to have documentation that proves the property has been the main residence during the period required by law to avoid contingencies with the Tax Administration. Each wealth situation must be analyzed to ensure that the donation structure complies with IRPF regulations.