Example: reinvestment in annuities

Mrs. PPG On March 7, 2022, it sells shares of the company "XX" that are listed on the Stock Exchange for an amount of 50,000 euros. These shares were acquired in 1997 for the amount of 20,000 euros.

In August 2022, it constitutes a life annuity by paying a premium of 50,000 euros.

Likewise, in September he sold a property that he acquired in 1999 for 110,000 euros for 250,000 euros, including the expenses and taxes inherent to said acquisition.

The amount obtained from the sale is also used to create the annuity.

Determine the amount of capital gain exempt from reinvestment.

Solution:

1. Transfer of shares of company "XX"

Transfer value: 50,000

Acquisition value: 20,000

Capital gain (50,000 - 20,000) = 30,000

Capital gain exempt from reinvestment: 30,000

2. Transfer of the property

Transfer value: 250,000

Acquisition value: 110,000

Capital gain (250,000 - 110,000) =: 140,000

Exempt capital gain (1) (190,000 x 140,000) ÷ 250,000 = 106,400

Note to example:

(1) Given that the maximum amount to be reinvested in an annuity is 240,000 euros and the amount of the transfer exceeds, considering the previous reinvestments, this amount, only the amount of the difference between 240,000 euros and the amount of the previous reinvestments will be considered reinvested, that is, 190,000 euros (240,000 – 50,000).

As the amount considered reinvested (190,000 euros) is less than the total amount received in the transfer (250,000 euros), only the proportional part of the capital gain obtained that corresponds to the reinvested amount will be excluded from taxation. (Back)