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V1014-21 20 April 2021 · SG de Tributación de las Operaciones Financieras Criterion in force
IRPF · ganancia patrimonial

Mortgage debt cancellation via life insurance may result in capital gains

An individual has enquired whether the partial cancellation of a mortgage loan, following the death of their domestic partner and the subsequent payout of a life insurance policy by the bank, has tax implications. The DGT explains that this may constitute a capital gain depending on the portion of the debt being cancelled.

The question raised

Taxation of the benefit derived from the death of the consultant's partner

The DGT's ruling

If the insurance benefit only cancels the portion of the debt corresponding to the deceased, there is no income for the survivor. If the benefit also cancels part of the consultant's debt, she obtains a capital gain subject to Personal Income Tax (IRPF) for the amortized amount of her share. This gain is included in the general tax base pursuant to Article 37.1.l) of the Personal Income Tax Law (LIRPF).

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