Taxes when selling bare ownership: IRPF and exemption for over-65s

What is being transferred for tax purposes

In a typical transaction, the seller retains the life usufruct and transfers the bare ownership. For property transfer tax and IRPF purposes, it is worth separating:

• The value of the property under full ownership (market reference).
• The valuation of the usufruct (according to statutory rules and indicative tables based on age or term).
• The agreed price for the bare ownership, which you negotiate with the buyer.

The market price and the tax valuation do not necessarily coincide. Conflating them indiscriminately is one of the most common mistakes.

IRPF: capital gains

Under IRPF, selling bare ownership can generate a capital gain or loss by comparing the transfer value with the acquisition value and allowable deductible expenses in your case (improvements, transfer costs, etc.).

The gain is taxed according to the brackets and rules in force in the tax year of the sale. Specific rates are not listed here as they change with budget legislation and vary by autonomous community in the regional bracket.

Exemption under Art. 33.4.b LIRPF (over-65s, main residence)

The IRPF Act provides an exemption for taxpayers aged 65 or over who transfer their main residence. The tax authority, in its income tax manuals aimed at over-65s, states that this exemption can apply when transferring bare ownership while retaining a life usufruct over that same main residence.

Indicative conditions (each case must be verified individually):

• Minimum age of the transferor at the time of transfer.
• That the property qualifies as a main residence under applicable regulations and satisfies the required period of occupancy.
• That the transaction fits the specific case of transfer with retention of a life usufruct, not other arrangements.

Important: if ownership was already split (for instance, if you were already the bare owner and someone else was the usufructuary), the exemption does not apply to either party under the terms described by administrative doctrine for a sale with retention of usufruct by a sole owner who continues living there. The prior legal structure of the right matters.

Municipal capital gains tax (IIVTNU)

The tax on the increase in value of urban land (IIVTNU) is managed by local town halls. In bare ownership transfers, the tax assessment depends on how the municipality applies its local ordinance and on recent case law regarding taxable events and relief.

Before agreeing a price, check with the local council or your advisor how the transfer of bare ownership would be treated in your municipality. Do not automatically assume the tax payable will be identical to a standard full ownership sale.

Taxes on the buyer's acquisition

The buyer of bare ownership also faces their own tax obligations (ITP/AJD for resale properties, depending on the autonomous community). The Cadastral reference value may establish minimum tax thresholds if the declared price is lower. This affects the overall negotiation, not just your IRPF as the seller.

Annuities or deferred payments

If you receive payment through a life annuity or periodic payments instead of a lump sum, the tax timeline may be spread over time depending on how each payment is classified. The payment method changes cash flow and often impacts your annual tax return. It must be clearly detailed in the deed and in your tax plan.

Estate planning and heirs

Lifetime tax exemption does not eliminate all inheritance consequences. By retaining usufruct, you reduce what bare ownership transfers to heirs at the time of sale. It is advisable to align the transaction with your will, usufruct terms and family expectations to prevent future disputes.

What to prepare before signing

1. Certificate or proof of main residence if you intend to claim the exemption.
2. Acquisition title deeds and receipts for deductible improvements.
3. An IRPF tax simulation with and without the exemption.
4. A municipal query regarding IIVTNU.
5. Legal review of usufruct clauses (expenses, works, termination).

When required, Sky Law (the group's in-house law firm) reviews the sale and purchase agreement and usufruct details in coordination with your tax advisor.

Common mistakes

• Assuming the exemption applies without verifying age, main residence status and the transaction structure.
• Ignoring municipal capital gains tax by focusing solely on IRPF.
• Signing an ambiguous usufruct agreement and later arguing over who pays service charges or property tax (IBI).
• Comparing only the initial lump sum without considering taxes and ongoing income.

To explore whether bare ownership fits your profile and location (Madrid, Mallorca, Valencia and other areas depending on availability), visit our bare ownership sales page. For the alternative of selling full ownership and staying on as a tenant, read our comparison with guaranteed rental.