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V3394-20 23 November 2020 · SG de Impuestos Patrimoniales, Tasas y Precios Públicos Criterion in force
ISD · hecho imponible

Inheritance and Gift Tax should not be levied on life insurance proceeds if subject to Income Tax

A company director enquired whether Inheritance and Gift Tax was payable upon receiving life insurance proceeds contracted by the company. The DGT ruled that, as the proceeds constitute remuneration for her position, they are subject to Income Tax (IRPF) and are therefore exempt from Inheritance and Gift Tax.

The question raised

Whether, upon receiving the capital at the maturity of the insurance, a settlement of Inheritance and Gift Tax must be made.

The DGT's ruling

The receipt of life insurance capital by a beneficiary other than the policyholder constitutes a taxable event for Inheritance and Gift Tax. However, if the benefit is integrated into the taxable base of Personal Income Tax, it is not subject to said tax. In this case, as the insurance was contracted by the company for its administrator, the capital is considered employment income and, therefore, is not taxed under Inheritance and Gift Tax.

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