8.2.6.2. Exemption for reinvestment in annuities

Transfer of assets by taxpayers over 65 years of age with reinvestment of the amount obtained in annuities

Capital gains that are revealed during the transfer of assets by taxpayers over 65 years of age are exempt from tax, provided that the total amount obtained from the transfer is used to constitute a life annuity insured in their favor.

The exemption for reinvestment in annuities is also applicable to capital gains derived from the transmission of assets used in economic activities, as well as to those obtained through entities attributing income when the member of the entity makes the reinvestment in compliance with the requirements. required requirements.

Reinvestment term

The life annuity must be established within six months from the date of transmission of the asset element.

However, when the capital gain is subject to withholding and the transfer value reduced by the amount of the withholding is used entirely to constitute a life annuity within the aforementioned period of six months. The period to allocate the withholding amount, if applicable, to the constitution of the annuity will be extended until the end of the year following the one in which the transfer is made.

Conditions and requirements for the application of the exemption

1. The annuity contract must be signed between the taxpayer, who will have the status of beneficiary, and an insurance entity.

   In life annuity contracts, reversal mechanisms or certain benefit periods or counterinsurance formulas may be established in the event of death once the annuity has been established.

   In order to ensure that the application of the exemption of reinvestment gain provided for in article 38.3 of the Personal Income Tax Law fulfills the intended purpose, it is required for contracts entered into after April 1, 2019, in which establish reversal mechanisms, certain benefit periods or counterinsurance formulas in the event of death, compliance with the following requirements (Additional Provision Ninth Law):

   • In the case of reversal mechanisms in the event of the death of the insured, there may only be one potential beneficiary of the annuity who reverts.

   • In the case of certain benefit periods, said periods may not exceed 10 years from the constitution of the annuity.

   • In the case of counterinsurance formulas, the total amount to be received upon the death of the insured may at no time exceed certain percentages with respect to the amount allocated to the constitution of the annuity.

2. The life annuity must have a periodicity of less than or equal to one year, beginning to be received within a period of one year from its constitution, and the annual amount of the annuities may not decrease by more than five percent with respect to the previous year.

3. The taxpayer must inform the insurance company that the life annuity contracted constitutes the reinvestment of the amount obtained from the transfer of assets, for the purposes of applying the exemption provided for in this article.

Maximum reinvestment limit

The maximum total amount whose reinvestment in the creation of annuities will give the right to apply the exemption will be 240,000 euros.

If, as a result of the reinvestment of the amount of a transfer in a life annuity, the amount of 240,000 euros is exceeded, considering the previous reinvestments, only the amount of the difference between 240,000 euros and the amount of the previous reinvestments will be considered reinvested.

Partial reinvestment

When the reinvested amount is less than the total amount received in the transfer, only the proportional part of the capital gain obtained that corresponds to the reinvested amount will be excluded from taxation.

Reinvestment in a year other than that of the disposal

When the reinvestment is not carried out in the same year as the sale, the taxpayer will be obliged to state in the declaration for the year in which the capital gain is obtained his intention to reinvest under the conditions and deadlines indicated, completing the corresponding heading.

Failure to comply with the conditions of the reinvestment, total or partial anticipation of the economic rights derived from the life annuity established

Failure to comply with any of the conditions established in this article, or the anticipation, in whole or in part, of the economic rights derived from the life annuity established, will determine the subjection to taxation of the corresponding capital gain.

In such case, the taxpayer will allocate the non-exempt capital gain to the year of its obtaining, performing complementary self-assessment, including late payment interest, and it will be presented within the period between the date on which the non-compliance occurs and the termination. of the regulatory declaration period corresponding to the tax period in which said non-compliance occurs.