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Practical manual for Income Tax 2023.

Introduction

Regulations: Art. 25.3 Law Income Tax

The income, whether monetary or in kind, from capitalisation operations and life or disability insurance contracts generates income from movable capital subject to IRPF , provided that the contractor and beneficiary are the same person, except in the case of disability insurance whose beneficiary is the mortgage creditor in which the income will have the same tax treatment that would have corresponded if the beneficiary had been 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.

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

Benefits of insurance contracts that are taxed as employment income

Regulations: Art. 17.2 a) Law Personal Income Tax

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 December 15).

As we will see throughout this section, for the purposes of taxing income from capital from capitalization operations and life or disability insurance contracts, the Personal Income Tax Law establishes distinctions based on the way benefits are received (income or capital), the term of the operations and the coverage of contingencies, such as, for example, 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 can be stipulated on one's own life or that of a third party, both in case of death and in case of survival or both together, as well as on one or more heads ( article 83 Law 50/1980, of October 8, on Insurance Contracts).