When buying a property under the Spanish sun, it is interesting to consider how you are going to buy. After all, this can avoid unpleasant or pricey surprises afterwards.
When buying a property under the Spanish sun, it is interesting to consider how you are going to buy. After all, this can avoid unpleasant or pricey surprises afterwards.
BUYING AS A PRIVATE INDIVIDUAL UNDER USUFRUCT / BARE OWNERSHIP: WHAT YOU NEED TO KNOW
If, as a Belgian national, you own a Spanish home in full ownership and you die, the inheritance tax in Belgium can be quite high.
Therefore, in many cases it may be interesting to purchase your new gem under the form of a split purchase.
When you decide to make a split purchase, this means that you will not purchase full ownership in this case.
In this case, usually your children will buy the bare ownership and the parents the usufruct.
This technique, as it were, splits the full ownership into two: bare ownership - usufruct and is also very common in Spain.
In short:
The usufructuaries own the enjoyment of the Spanish property. They can live in it or rent it out and collect this income.
The bare owners own the Spanish property per se, but cannot derive either enjoyment or income from it.
The Spanish notarial deed of purchase
You can perfectly buy your Spanish gem under the form of bare ownership / usufruct. However, it is important to know that the value of the bare ownership and usufruct is determined by the Spanish distribution key and not by Belgium.
What if the usufructuaries die?
When a full owner dies, his heirs will pay the inheritance tax in Belgium.
However, when a purchase was made with usufruct/naked ownership split, this inheritance tax will be waived when the usufructuary dies. However, the bare owner will have to pay Spanish transfer tax on the value of the usufruct.
What to watch out for
Each pays his own share. If you, as a parent, were to pay the full amount (i.e. including the bare ownership portion), you could soon run into problems.
The tax authorities consider this a "covered favour" and will still levy inheritance tax upon death.
It is therefore important that the bare ownership is also effectively paid by the bare owners themselves.
Solutions:
If your children have the means to finance the value of the bare property themselves, it is important that they actually pay it personally.
In this case, the account statements of the payments are an ideal proof to avoid discussions afterwards. These are also added to the notarial deed in Spain.
However, often the children do not have the means to purchase the bare property. In this case, the parents will gift the value of the bare property to the children.
Ways to donate to your children
There are two ways you can gift.
1. Notarised gift: you pay 3%* gift tax in this case. (*parents - children). By paying the gift tax, you automatically forfeit the inheritance tax.
2. Unregistered bank donation: you transfer the amount to your children's account and keep good proof of this. no notary intervenes and so no gift tax is due on this.
However: if you opt for option 2, there is still a condition you need to fulfil to eliminate the taxman once and for all. You must continue to live for three years after the gift. If you, the donor, die within the three years of giving the gift, then the donated amount will be subject to inheritance tax. Which comes out more expensive than the gift tax.