Under Belgian law, a split purchase, in which the parents purchase the usufruct and the children the bare ownership, is still a valid route for inheritance planning. This also applies to real estate located in Spain. For Dutch citizens (or better: residents of the Netherlands), such a construction is often not fiscally interesting. Therefore, this article discusses the tax treatment of a split purchase in Spain for Dutch citizens.
How does a split purchase work in Spain?
Under Spanish law, a split purchase is possible. The usufruct and bare ownership can be purchased separately. The lifetime usufruct valuation is calculated based on the age of the youngest usufructuary, namely 89 - the age of the youngest usufructuary = the percentage of usufruct, with a minimum of 10%.
An example. You are 60 years old at the time of purchase. Your partner is 62 at the time of purchase. The value of usufruct is then 89 - 60 = 29%. The value of bare ownership 71%.
On the death of the last usufructuary, the bare owner acquires full ownership of the property. Transfer tax is paid on the value of the usufruct at death. This rate depends on the region. In Alicante, for example, it is 10%. In Málaga, 7%.
An example. You buy a €400,000 property in Alicante. The usufruct at purchase comes to 29% or 116,000 euros. However, at the death of the last usufructuary, the value of the house is 550,000 euros. The value of the usufruct at that time is then 159,500 euros (= 29% of 550,000 euros). On this, the heirs then pay 10%, i.e. 15,950 euros transfer tax.
Here you will find more information on split purchase for residents of Belgium.
How does split purchase work in the Netherlands?
The Dutch Succession Act provides for a fiction provision that visions a split purchase. Article 10 of this law ensures that full ownership is part of the estate if, during the testator's lifetime, certain family members, including children, acquired bare ownership without having paid for it directly or indirectly.
Thus, the Spanish home is counted in its entirety as part of the inheritance, subject to deduction of an interestable purchase price for the bare ownership. If the purchase price of the bare ownership has been waived, this amount may not be deducted from the acquisition.
An example. You bought a property worth 400,000 euros in Alicante, of which 29% usufruct (116,000 euros) is for you and 71% bare ownership (284,000 euros) is for your child. At death, the value is 550,000 euros. Normally, you may deduct the 284,000 euros of bare ownership, to be increased by 6% per year, from the 550,000 euros. However, you have in fact self-financed the bare ownership through a loan you have waived. As a result, the full 550,000 euros will be taxed in the Netherlands.
You may deduct the Dutch gift tax paid (with 6% interest per year) from the acquisition. The Spanish inheritance tax due will be offset against the Dutch inheritance tax due.
Find more information on Dutch inheritance tax on Spanish property here.
Conclusion: split purchase in Spain rarely interesting for Dutch people
For residents of the Netherlands, a split purchase in Spain is not appropriate. First, transfer tax is payable in Spain on death. In addition, the heirs also pay Dutch gift tax on the full current value of the property. As a result, there is no optimisation. An alternative could be the purchase of a piece of full ownership.
