Temporary or life annuities
Regulations: Art. 17.Two Wealth Tax Law
The valuation of temporary or life annuities established as a result of the delivery of capital, whether in money, movable or immovable property, the ownership of which corresponds to the declarant must be carried out by the result of capitalizing the annuity at the legal interest rate of money in force on the date of accrual of this tax (December 31) and taking from the resulting capital that part that, according to the rules established to value usufructs, corresponds to the age of the annuitant, if the annuity is for life, or to the duration of the annuity, if it is temporary.
The rules for assessing usufructs can be consulted in the section " Real rights of use and enjoyment (excluding those that, where applicable, fall on the habitual residence of the taxpayer)", which is discussed in this same Chapter.
For the 2019 financial year, the legal interest rate on money has been set at 3%.
When the amount of income is not quantified in monetary units, the valuation will be obtained by capitalizing the amount of 7,519.59 euros, the amount of the public indicator of multiple-effect income (IPREM) for the year 2019.
Example
Mr. MPS, aged 60 as of 31 December 2019, transferred the apartment in which he resided in exchange for a life annuity of 12,000 euros per year. The legal interest rate on money in 2019 was 3 percent.
Determine the value for which said life annuity must be declared in the Wealth Tax.
Solution
Capitalization of the income received:
12,000 x (100 ÷ 3) = 400,000 euros
The percentage corresponding to the life usufruct is applied based on the age of the annuitant:
(89 – 60) = 29%
Value of the life annuity:
29% of 400,000 = 116,000 euros