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Practical manual for Income Tax 2019.

Immediate, lifetime or temporary income insurance

  • Immediate life annuity insurance

    Regulations: Art. 25.3 a) 2 Law Income Tax

    In the case of immediate life annuities, which have not been acquired by inheritance, legacy or any other succession title, the result of applying the following percentages to each annuity will be considered as income from movable capital:

    • 40 percent , when the recipient is under 40 years of age.
    • 35 percent , when the recipient is between 40 and 49 years old.
    • 28 percent , when the recipient is between 50 and 59 years old.
    • 24 percent , when the recipient is between 60 and 65 years old.
    • 20 percent , when the recipient is between 66 and 69 years old.
    • 8 per 100 , when the recipient is 70 years old or older.

    These percentages will correspond to the age of the annuitant at the time of establishing the annuity and will remain constant throughout its validity. The portion of income considered to be capital gains, by applying the corresponding percentage, was subject in 2019 to a withholding rate of 19 percent.

    Note: It is understood that the income has been acquired by inheritance, legacy or any other succession title, when the acquisition of the same has been motivated by the death of the contractor, if the insurance is individual, or of the insured if the insurance is collective contracted by the company.

    This same tax regime will be applicable to life annuities received from systematic individual savings plans that meet the requirements established in the Third Additional Provision of the Personal Income Tax Law, even in cases where the aforementioned systematic individual savings plans are the result of the transformation of certain life insurance contracts entered into prior to January 1, 2007 in which the contracting party, insured party or beneficiary is the taxpayer himself.

    See the fourteenth transitional provision of the Personal Income Tax Law regarding the transformation of certain life insurance contracts into individual systematic savings plans. See also Additional Provision Five of the Personal Income Tax Regulations regarding the total or partial mobilization between individual systematic savings plans.

  • Immediate temporary income insurance

    Regulations: Art. 25.3 a) 3 Law Income Tax

    In the case of immediate temporary income, which has not been acquired by inheritance, legacy or any other succession title, in the terms discussed in the previous section, the result of applying the following percentages to each annuity will be considered as income from movable capital:

    • 12 percent , when the income has a duration of less than or equal to 5 years.
    • 16 percent , when the income has a duration greater than 5 and less than or equal to 10 years.
    • 20 percent , when the income has a duration greater than 10 and less than or equal to 15 years.
    • 25 percent , when the income has a duration of more than 15 years.

    The portion of income that is considered capital gains, by applying the corresponding percentage, will be subject to withholding tax.