Benefits of collective insurance contracts that implement company pension commitments

Regulations: eleventh transitional provision Law IRPF

Recipients of benefits received in the form of capital derived from contingencies occurring after January 1, 2011, from insurance taken out before January 20, 2006, may apply the financial and tax regime in force on December 31, 2006, but only to the part of the benefit corresponding to contributions made up to that date (December 31, 2006), as well as to the ordinary premiums provided for in the original policy of the contract paid after that date.

This regime was as follows:

1. Business contributions not attributed to workers

   The applicable reduction on the amount of the benefit received is 40% in the following cases:

   • When they correspond to premiums paid more than two years prior to the date on which they are received.
   • In the case of disability benefits, regardless of the period of time elapsed since the first contribution.

2. Business contributions attributed to workers

   The reduction percentages indicated below must be applied to the amount resulting from reducing the benefit received by the amount of employer contributions attributed to the worker, as well as the amount of contributions, if any, made by the worker himself.

   Reduction 75%	Reduction 40%
   Returns corresponding to premiums with more than five years in advance	Returns corresponding to premiums with more than two years in advance
   Benefits for permanent total disability or severe disability	Remaining disability benefits

   However, a one-off reduction of 75% may be applied to the total income if the following requirements are met:

   • That these are insurance contracts entered into after December 31, 1994.

   • That more than eight years have passed since the first premium was paid.

   • That the average period of permanence of the premiums has been greater than four years. This average period is the result of calculating the sum of the premiums multiplied by the number of years of service and dividing it by the total sum of the premiums paid. That is to say:

     ∑ (Premiums x number of years of permanence) / ∑ (premiums paid)

   • In the event that there have been periodic or extraordinary premiums, in order to determine the portion of the total return obtained that corresponds to each premium, said total return will be multiplied by the weighting coefficient resulting from the following quotient: In the numerator, the result of multiplying the corresponding premium by the number of years elapsed since it was paid until the benefit was collected, and in the denominator, the sum of the products resulting from multiplying each premium by the number of years elapsed since it was paid until the benefit was collected. That is to say:

     Premium x number of years elapsed from payment to collection /<!--StartFragment--> ∑<!--EndFragment--> (each premium x number of years elapsed from its payment to collection)

     This same regime is also applicable to collective insurance contracts that implement the externalization of pension commitments agreed in collective agreements at a supra-company level under the name "retirement bonuses" or others, which consist of a benefit payable once only at the time of cessation due to retirement, signed before December 31, 2006.

   Important: As from 1 January 2015, the application of the reductions under the transitional regime is limited to benefits in the form of capital received within the time periods indicated in section 3.