As part of the real estate wealth tax return, the taxpayer may be required to declare a property over which he or she holds a right of usufruct, the nature of which may vary depending on the circumstances of the acquisition.

Legal usufruct

When this right results from a legal situation such as the usufruct of the surviving spouse provided for in Article 757 of the Civil Code, it does not entail taxation on the full ownership of the property but only on the value of the usufruct determined according to the tax scale of Article 669 of the General Tax Code. This scale establishes a percentage according to the age of the usufructuary on January 1st of the tax year, so a usufructuary aged 75, for example, declares 30% of the value of the property. This mechanism aims to distribute the tax burden fairly between the usufructuary and the bare owner without increasing the taxation of the surviving spouse already affected by the death.

Conventional usufruct

On the other hand, when the usufruct is the result of a gift with a reservation of usufruct, it is a conventional usufruct that transfers the bare ownership to a third party while retaining the use and income of the property. In this case, the usufructuary remains fully liable for real estate wealth tax on the entire full ownership value of the property, without any proration related to age. The property is therefore included in its taxable assets for its market value on 1 January of the year in question, regardless of the share of the rights in rem held. This difference in treatment is because in the context of a gift, the usufructuary has voluntarily retained the enjoyment of the property and remains the main economic beneficiary.

This distinction between legal usufruct and conventional usufruct is fundamental because it determines the basis of the IFI and conditions the taxpayer's reporting obligations. In the event of an audit, it is advisable to be able to justify the origin of the dismemberment by any appropriate document such as a notarial deed of donation, a deed of notoriety or a death certificate to secure the tax return.

Faced with the complexity of the rules applicable to IFI and the importance of properly qualifying the nature of the usufruct held, our firm puts its expertise at your service to analyze the legal nature of the dismemberment and its tax implications, assist you in the collection and presentation of the necessary supporting documents, secure your IFI declaration and anticipate possible changes in assets in order to optimize your taxation.

Our personalized approach allows you to calmly approach your reporting obligations and minimize the risks in the event of an audit.

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