Does Usufruct Right Become Subject to Inheritance and Transfer Tax?

Usufruct right gives the usufructuary the right to fully enjoy or benefit from another person's property. Usufruct right is established by registering it in the land registry for immovable property.

It is a common practice to establish usufruct rights over independent units. An independent unit with usufruct right gives the usufructuary the right to live in the relevant independent unit, rent it out, or otherwise fully benefit from it.

So, does the usufruct right become subject to inheritance and transfer tax in the event the usufructuary passes away?

Tax Office Practices

In the practices of tax offices, if the usufructuary passes away while the usufruct right continues, the inheritance and transfer tax is applied to the usufruct right to the heirs of the usufructuary. However, this practice is incorrect.

Usufruct right is a personal right that cannot be transferred or transferred by inheritance. According to the clear provision of Article 797 of the Turkish Civil Code, the usufruct right terminates automatically with the death of the usufructuary. The decision of the Supreme Court Assembly of Civil Chambers dated 06.04.2021, numbered 2017/2641 E. and 2021/411 K. also confirms that the usufruct right cannot be transferred and cannot be transferred to the heirs.

However, according to Article 5 of the Inheritance and Transfer Tax Law, "The taxpayer of the Inheritance and Transfer Tax is the person who acquires the property by inheritance or in a gratuitous manner." In other words, for something to be subject to the Inheritance and Transfer Tax, the heir must transfer it. Usufruct right, on the other hand, is not a right that can be transferred by inheritance.

In the decision of the 6th Tax Court of Appeal of Istanbul dated 10.04.2018 and numbered 2018/378 E. and 2018/1825 K., the decision to accept the objection to the inheritance and transfer tax levied on the grounds that "the usufruct right of the mother K1 of the plaintiff, who is the usufructuary of the immovable property of the plaintiff, will automatically terminate with the death of the plaintiff's mother K1, will be deleted from the legal world together with all its rights and obligations, and the full ownership of the immovable property will be converted into full ownership," was approved.

What Should Be Done?

In case the usufruct right is made subject to inheritance and transfer tax, the tax assessment should be appealed within 30 days of the date of assessment/notification of the tax, and an application should be made to the tax court for the annulment of the assessment