Termination of usufruct upon death: taxes in Peru

Lifetime usufruct over a home is frequently used in Peru in family planning: parents reserve the usufruct and transfer the bare ownership to their children, usually by donation or as an advance of inheritance. When the usufructuary dies, the usufruct is extinguished. Does that pay taxes? The general rule is that consolidation, in itself, does not constitute a new taxed transfer, but you must comply with SUNARP, the municipality and SUNAT when the property is later sold.

What usufruct is in Peru

The Peruvian Civil Code (articles 999 to 1018) defines usufruct as the real right to use and temporarily enjoy the property of another. The maximum term is 30 years for natural persons, except for cases such as lifetime usufruct, which extends for the usufructuary's life.

The actors are:

• Bare owner: formal holder of the property. Their right is limited while the usufruct is in force.
• Usufructuary: has use and enjoyment of the property and assumes ordinary charges and minor repairs.

Causes of extinction

Article 1021 of the Civil Code lists the causes: death of the usufructuary (when lifetime), term expiration, consolidation, waiver, prescription due to non-use, abuse of the property, total destruction, and resolution of the constituent's right. Death is the most common in family planning.

When death occurs, the usufruct is extinguished by operation of law. The bare owner consolidates the attributes of property (use, enjoyment, disposition) and becomes a full owner.

Tax treatment in Peru

Income Tax (SUNAT)

Consolidation due to extinction of usufruct does not constitute a transfer for consideration nor a new donation. No Income Tax is generated for the bare owner from the mere consolidation.

When the full owner later decides to sell the property, the computable cost will be:

• If they received the bare ownership by purchase: the cost of acquisition for consideration, adjusted by IPM.
• If they received the bare ownership by donation or inheritance: the computable cost corresponding to the donor or deceased (when this person acquired the property for consideration) or, if this person also did not buy it, the autoavalúo of the year in which the gratuitous transfer occurred.

The rule applies to the entire property, it is not split between bare ownership and usufruct.

Alcabala (municipality)

Alcabala taxes property transfers. Consolidation due to extinction of usufruct does not constitute a new transfer: the bare owner was already the owner and only ceases to support the usufruct's burden. As a general rule, no Alcabala is paid for this consolidation. However, municipal practice varies and some administrations may require formal submission of the extinction deed to update the predial base.

Property Tax and arbitrios

Predial continues to be paid for the entire property. After consolidation, it is wise to submit the extinction deed and the updated literal copy to the municipality so that the HR and PU are in the new full holder's name.

How to formalize the extinction

Extinction of the usufruct by death is formalized in a public deed before a notary, which is registered in SUNARP in the same registry entry of the property. Although the effect is by operation of law, the SUNARP entry is essential for third parties: any future buyer, bank or public entity will check the entry before proceeding.

Step-by-step process

1. Obtain the death certificate of the usufructuary.
2. Gather the public deed that constituted the usufruct and the current literal copy of the property.
3. Request the notary to prepare a minute for extinction of usufruct by death and consolidation.
4. Sign the public deed. If there are several bare owners, all appear.
5. Pay the notary fees and registry fees.
6. Register the extinction in SUNARP.
7. Communicate the extinction to the municipality to update predial and arbitrios in the full owner's name.
8. If the property will be sold, only then are IR (second category) and Alcabala calculated for that new transfer.

Practical case: Lima

A father donated in 2012 the bare ownership of an apartment in San Isidro to his two children and reserved the lifetime usufruct. In 2026 he dies. The children go to the notary, present the death certificate and the original deed, sign the extinction and register it in SUNARP. They do not pay IR or Alcabala for the consolidation. The municipality updates the HR and PU of the autoavalúo in the children's name. Total procedure cost: approximately S/ 1,500.

Practical case: Arequipa, subsequent sale

A mother constituted usufruct in 2008 on a house in Cayma in her own favor and left the bare ownership to her daughter. The daughter received the bare ownership as an advance of inheritance. In 2026 the mother dies, the extinction of the usufruct is registered, and a year later the daughter decides to sell the house. To calculate the IR, she takes as computable cost the historical cost of the deceased (when she bought it in 1995) adjusted by IPM. The effective IR (5%) is calculated on the resulting gain.

Common mistakes

• Thinking that with the death certificate the entry is automatically updated: SUNARP requires a public deed.
• Selling the property before registering the usufruct's extinction in SUNARP: the operation will be questioned.
• Assuming the usufruct is transferable to the heirs of the usufructuary: it is not; it is extinguished upon death (article 1021 of the Civil Code).
• Forgetting to update the predial and arbitrios.
• Not keeping the original deed: it defines the tax treatment when later sold.

When specialized advice is appropriate

If the bare ownership was donated, it is important to review whether the donation paid IR at the time according to the rules in force (donations to relatives in a direct line have particular treatment). If there are several bare owners or the property is part of a larger estate, advice with a notary and tax expert saves future contingencies.

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