Taxation of health insurance benefits in Personal Income Tax

The Dirección General de Tributos (DGT) has clarified the tax treatment applicable to economic benefits derived from health insurance. This criterion is fundamental for individuals who receive these amounts following an accident or a judicial ruling.

What the DGT has ruled

The administration has established that the payment of a health insurance benefit must be classified as a capital gain. The calculation of said gain is carried out by finding the difference between the amount of the benefit received and the premiums that the insured party has paid to contract the policy.

In this sense, the DGT clarifies several critical points regarding the determination of the taxable base:

• Expenses derived from legal proceedings, such as lawyer fees, solicitor fees, or court costs, are considered consumption expenses. Therefore, they cannot be computed as capital losses to reduce the gain.
• As it is a capital gain, the 30 percent reduction provided for irregular employment income is not applicable.
• The obligation to report the gain in the tax period corresponds to the moment when the judicial ruling determining the benefit becomes final.

What it means for you

If you are a beneficiary of a health insurance benefit, you should know that the tax impact is not managed as income from movable capital, which alters the way income is declared. The net amount to which the tax will be applied will be the difference between what was collected and what was paid in premiums, without the possibility of deducting the legal costs incurred to obtain said benefit.

What you should do

It is necessary to keep precise track of the premiums paid during the term of the insurance to correctly determine the base of the capital gain. Likewise, the exact date on which the judicial ruling becomes final must be identified to ensure that the reporting in Personal Income Tax (IRPF) is carried out in the corresponding tax year. Since each contractual situation may vary, it is necessary to assess each case individually to determine the exact impact on your general taxable base.