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V2558-14 20 September 2014 · SG de Impuestos Patrimoniales, Tasas y Precios Públicos Criterion in force
OTRO · rescate de seguro

Life insurance surrender subject to Income Tax; maturity payments subject to Inheritance and Gift Tax

A married couple sought clarification on the taxation of a life insurance policy held under community property. The Directorate-General for Tax Assurance (DGT) clarified that if the policyholder surrenders the insurance, it is subject to Personal Income Tax (IRPF), whereas if the beneficiary receives the payment upon maturity, it is subject to Inheritance and Gift Tax (ISD).

The question raised

Taxation of the surrender of the policy.

The DGT's ruling

If the policyholder exercises the right of surrender during the term of the insurance, the yield obtained is considered income from movable capital for Personal Income Tax purposes. If no surrender occurs and the beneficiary receives the benefit upon maturity, the amount is subject to Inheritance and Gift Tax as it constitutes an acquisition of rights gratuitously and inter vivos. In the latter case, the tax base shall be the net value of the acquired right, corresponding to the amount of the benefit received.

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