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V0243-24 29 February 2024 · SG de Tributación de las Operaciones Financieras Criterion in force
IRPF · ganancia patrimonial

Loan cancellation via payment protection insurance is subject to capital gains tax

A taxpayer queried whether the benefit from a payment protection insurance policy, which cancels a loan and leaves a surplus, is subject to Personal Income Tax (IRPF). The Directorate General for Taxes (DGT) ruled that the transaction does not constitute insurance income, but rather a capital gain resulting from a change in the composition of the taxpayer's assets.

The question raised

Taxation under Personal Income Tax regarding the aforementioned benefit.

The DGT's ruling

The amount paid to the bank to cancel the loan releases the policyholder from their payment obligation, which constitutes a capital gain. Likewise, the portion of the benefit received directly by the taxpayer must also be classified as a capital gain as it produces an alteration in the composition of their assets.

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