Personal Income Tax exemption for the sale of bare ownership of a primary residence

The Dirección General de Tributos (DGT) has issued a relevant ruling regarding the taxation of transactions involving the transfer of bare ownership of a property. The inquiry focused on determining whether the exemption provided for the sale of a primary residence is applicable when only the bare ownership is transferred and not the usufruct.

What the DGT has ruled

The advisory body has determined that the transfer of bare ownership constitutes, for tax purposes, a capital gain or loss. In this sense, it has clarified that it is possible to apply the exemption established in the Personal Income Tax Law (LIRPF) provided that the legal requirements are met.

For the capital gain derived from the transfer of bare ownership to be exempt, two fundamental conditions must be met:

• The property must be the habitual residence of the transferor, meeting the requirements of continuous residence for three years or having been so in the previous two years.
• The transferor must be over 65 years of age.

A key aspect of this resolution is that the exemption applies regardless of the subsequent use of the property following the transaction.

What this means for you

This ruling has a direct impact on individuals over 65 who own their primary residence and decide to carry out a dismemberment of ownership. If you meet the age and residence requirements for the property, the gain you obtain from the sale of the bare ownership will not be subject to taxation under IRPF.

What you should do

In the event of such a transaction, it is necessary to precisely verify compliance with the residence requirements demanded by current regulations. The correct accreditation of the status of habitual residence is decisive to ensure the application of the exemption. It is recommended to assess each particular situation to confirm that all provisions of the LIRPF and the IRPF Regulations are met before proceeding with the transfer.