Modifying the duration of a usufruct?

Extending or reducing the duration of a usufruct: practical and tax implications

Extending the duration of a usufruct

• Patterns:
  • Amortize renovations to avoid a benefit in kind (ATN) at the end of the usufruct.
  • Allow your company to pay compensation.
• Procedure:
  • The extension is agreed between you and your company, preferably by notarial deed to make it enforceable against third parties.
• Term: Up to a maximum of 99 years, including the initial term.
• Tax consequences:
  • The compensation paid is a depreciable investment for the company and tax-free for the beneficiary.
  • You will be taxed on an ATN if you occupy the property free of charge.
  • Compensation must reflect real economic value to avoid taxation on the surplus.
• Registration fees:
  • Case law: €50 for the deed of extension, as this is not a transfer of ownership.
  • Flemish tax position: possible application of sales tax, although questionable.

Reducing the duration of a usufruct

• Patterns:
  • The asset is no longer used by the company.
  • Simplified estate planning.
• Procedure:
  • The company renounces the usufruct by notarial deed, possibly in return for compensation equal to the residual value.
• Tax consequences:
  • The company can amortize the residual usufruct using exceptional amortization.
  • If you pay an indemnity, it is taxable for the company after deduction of the book value and non-deductible for you.
  • The end of the usufruct puts an end to taxation on a NTD linked to free housing.
• Registration fees:
  • In principle, the fee is €50.
  • If the waiver is qualified as a disguised sale, sales tax could apply (rare, burden of proof on the tax authorities).

Examples in figures:

1. 15-year extension: Compensation of €120,000, amortized over 15 years by the company. You are taxed on a NTD if you occupy the property.
2. 5-year reduction: indemnity of €75,000 paid to the company. The company depreciates €50,000 and is taxed on the remaining €25,000.

In conclusion, these operations need to be carefully evaluated from a tax and legal point of view, to avoid unforeseen costs or litigation.