Transfer of assets by persons over 65 years of age with reinvestment in life annuities

Regulations: Art. 38.3 and Ninth Additional Provision Law IRPF ; art. 42 Regulation Income Tax

Capital gains derived from the transfer by persons over 65 years of age of assets are exempt, provided that the total amount obtained is used within six months to create an insured life annuity in their favor.

The maximum total amount that a taxpayer may use to establish life annuities be 240,000. This investment limit is per taxpayer, not per transaction.

When the reinvested amount is lower than the total of the amount received in the transfer, only the proportional part of the capital gain obtained corresponding to the reinvested amount will be excluded from taxation.

Failure to comply with the conditions of reinvestment or anticipation, in whole or in part, of the economic rights derived from the established life annuity will result in the corresponding capital gain being subject to taxation.

In such case, the taxpayer will impute the non-exempt capital gain to the year in which it was obtained, by filing a supplementary self-assessment, including late payment interest, which will be submitted within the period between the date on which the breach occurs and the end of the regulatory declaration period corresponding to the tax period in which said breach occurs.

Requirements of the insured annuity

1. The life annuity contract must be signed between the taxpayer , who will be the beneficiary, and an insurance company .

   In life annuity contracts, reversal mechanisms or certain benefit periods or counter-insurance formulas may be established in the event of death once the life annuity has been established. For contracts entered into after April 1, 2019, in order to ensure the application of the exemption from reinvestment gains provided for in Article 38.3 of the Personal Income Tax Law, the requirements set forth in the Ninth Additional Provision of the Personal Income Tax Regulations must be met.

2. The life annuity must have a periodicity of less than or equal to one year , must begin to be received within one year from its establishment, and the annual amount of the income may not decrease by more than 5% compared to the previous year.

3. The taxpayer must inform the insurance company that the life annuity being contracted constitutes the reinvestment of the amount obtained from the transfer of assets, for the purposes of applying this exemption.

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