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Practical manual for Income Tax 2021.

Introduction

Regulations: Art. 25.3 Law PIT

The returns, whether monetary or in kind, from capitalization operations and life or disability insurance contracts generate returns on movable capital subject to the PIT, provided that the contractor and beneficiary coincide in the same person, except in the case of disability insurance whose beneficiary is the mortgagee in which the income will have the same tax treatment that would have corresponded if the beneficiary were the taxpayer himself.

Otherwise (that is, when the contractor and beneficiary do not coincide) the receipt will normally be taxed under the Inheritance and Gift Tax.

Capitalization operations and life or disability insurance contracts are exempt from this classification as income from movable capital when, in accordance with article 17.2.a) of the Law onPIT , must be taxed as income from work.

Benefits of insurance contracts that are taxed as employment income

Regulations: Art. 17.2 a) Law PIT.

benefits derived from the following insurance contracts entered into within the framework of social security are taxed as employment income:

  • Insurance contracts entered into with social security mutual societies whose contributions may have been, at least in part, deductible expenses or subject to reduction in the tax base.
  • Company social security plans, as well as collective insurance that implement the pension commitments assumed by companies, in the terms provided for in the First Additional Provision of the consolidated text of the Law on the Regulation of Pension Plans and Funds, approved by Royal Legislative Decree 1/2002, of November 29 ( BOE of December 13).
  • Insured pension plans.
  • Dependency insurance in accordance with the provisions of Law 39/2006, of December 14, on the Promotion of Personal Autonomy and Care for People in Situations of Dependency ( BOE of 15).

As we will see throughout this section, for the purposes of taxing the income from movable capital arising from capitalization operations and life or disability insurance contracts, the Law ofPIT It establishes distinctions based on the form of receipt of benefits (income or capital), the term of the operations and the coverage of contingencies, such as retirement or disability.

Capitalization operations are considered to be those based on actuarial techniques, which consist of obtaining commitments determined in terms of their duration and amount in exchange for previously established single or periodic disbursements. See the Annex of Law 20/2015, of July 14, on the regulation, supervision and solvency of insurance and reinsurance entities, ( BOE of July 15), section B).b).2.

A life insurance contract is a contract in which the insurer is obliged, through the collection of the stipulated premium and within the limits established by law and in the contract, to pay the beneficiary a capital amount, an income or other agreed benefits, in the event of the death or survival of the insured, or both events jointly. Life insurance may be stipulated on one's own life or that of a third party, both in the event of death and survival or both jointly, as well as on one or more heads (article 93 of Law 50/1980, of October 8, on Insurance Contracts).