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V2573-17 10 October 2017 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · incapacidad permanente absoluta

Social Security absolute disability pensions are tax-exempt, but life insurance payouts for illness are not

A taxpayer inquired whether both Social Security absolute disability pensions and life insurance payouts are tax-exempt. The DGT ruled that while the pension is exempt, the life insurance benefit is taxable as income from movable capital.

The question raised

Whether the two incomes received in the year 2016 are exempt.

The DGT's ruling

Social Security benefits for absolute permanent disability are exempt from Personal Income Tax (IRPF), subject to the limit of the maximum recognized benefit. Life insurance compensation for illness is not exempt as it is not an accident insurance. Said benefit constitutes income from movable capital, determined by the difference between the capital received and the premiums paid, and is included in the savings tax base.

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