Temporary or life annuities
Regulations: Art. 17.Two Wealth Tax Law
The valuation of temporary or life annuities constituted as a consequence of the delivery of capital, whether in money, movable or immovable property, whose ownership corresponds to the declarant, must be carried out by the result of capitalizing the annuity at the rate of legal interest of the 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 the usufructs, corresponds to the age of the renter, if the income is for life, or for the duration of the income, if it is temporary.
The rules for valuing usufructs can be consulted in the section " Real rights of use and enjoyment (excluding those that, where appropriate, fall on the habitual residence of the taxable person)", which is discussed in this same Chapter.
For the 2019 financial year, the legal interest rate on money has been set at 3 percent.
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 multiple-effect income indicator (IPREM) for the year 2019.
Example
Don MPS, 60 years old as of December 31, 2019, transferred the apartment in which he lived in exchange for a life annuity of 12,000 euros per year. The legal interest on money in 2019 was 3 percent.
Determine the value for which said 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 lifetime usufruct is applied depending on the age of the annuitant:
(89 – 60) = 29%
Life annuity value:
29% of 400,000 = 116,000 euros