In succession planning with the children, people often consider a split purchase. With this construction, the parents buy the usufruct and the children the bare ownership. However, the purchase costs may be different when buying usufruct in Spain compared to a normal transaction. Therefore, we provide more information in this article.
You are buying an existing property
When buying an existing property, you pay registration fees (ITP). The rate varies by autonomous region. For example, in Costa Blanca North and South you will pay 10% registration fees. In Murcia, it is 8% and in Andalusia, for the time being, 7%.
With the split purchase on an existing property, there is no difference in terms of registration fees on resale.
Read more about costs and taxes when buying in Spain.
You buy new construction
When buying new construction, you pay VAT on the Spanish mainland and Balearic Islands 10%. There is no split between the land and the construction. In addition, you pay a stamp duty. This stamp duty (AJD) depends on the autonomous region and ranges from 1.2% - 2%.
In Spain, however, there is no VAT on the sale of usufruct. As a result, you pay registration duty on the usufruct share and VAT + stamp duty on the bare ownership share. For this reason, in addition to the usual benefits in terms of inheritance planning, there are also lower purchase costs with a split purchase.
Note: Not all promoters agree to the sale of usufruct.
An example
You buy a new building in Murcia for the price of 250,000 euros excluding fees. The value of the usufruct corresponds to 36% or 90,000 euros. The value of the bare ownership is 64% or 160,000 euros. On the usufruct share, you will pay 8% registration fee. This is 7,200 euros. On the bare ownership share, you will pay 10% VAT + 2% stamp duty. This is a total of 19,200 euros. The total transfer taxes then come to 26,400 euros.
However, if you buy the full property, you will be charged 10% VAT + 2% stamp duty on the purchase price of 250,000 euros. This then comes to €30,000 transfer tax. The split purchase then results in a saving of €3,600. Nice touch.
Find more information about a split purchase in Spain here.
Accretion is taxable in Spain
When the usufruct extinguishes, the bare owner automatically becomes full owner. In Flanders, the increase in usufruct is not taxable. In Spain, however, it is. You will then pay registration duties based on the value of the usufruct at the time of accretion.
Find more information on the end of usufruct here.
So why is buying usufruct in Spain interesting?
Flemish inheritance tax also applies to foreign property. Through a split purchase, you can avoid inheritance tax on your property in Spain.
Do you have any questions about buying in Spain? If so, please feel free to contact with us.
