Tax benefits if you are fiscal resident in Spain

Ensure yourself an annuity after your retirement

Within the savings and investment products, there is the so-called life annuity insurance. These insurances also have interesting tax advantages.

This type of insurance guarantees that the holder receives a regular income until his or her death. Only when this insurance is taken out must you pay a minimum capital premium of 50,000 euros up to 240,000 euros per person.

The origin of this capital must come from a previous capital gain, as well as if you decide to invest in an annuity insurance within a maximum period of 6 months from the obtaining of this gain, which will exempt us from paying the tax that initially fell in relation to the capital gain.

This is a method of guaranteeing a certain standard of living for retirees who, when it comes to selling their second home or receiving benefits from some investment product, for example, prefer to ensure regular liquidity with lower taxation, to the point that those over 70 years of age will benefit from a 92% exemption, i.e. only 8% of the income they receive will be subject to taxation through a small withholding according to the scale of personal income tax savings.

What happens if you want to redeem the remaining investment? This will basically involve paying the taxes that were initially exempted, as well as taking into account the possibility of incurring some small loss, given that your capital was normally invested in bonds or public debt, which may have changed downwards at the time of redemption as the market finds itself in such a situation.

Finally, in the event of your death, the remaining capital will be passed on to your heirs as a benefit such as a life policy or insurance, or if you wish and indicate so at the time of contracting, as income as it was before your death.

It is the insured person who will decide at all times whether to receive higher income during their lifetime to the detriment of the capital or, on the contrary, to leave a greater investment for future beneficiaries.

If you are over 65 years old and you are planning, for example, to sell your second property in Spain, or any asset, and you do not need this money, you can benefit from important tax exemptions by contributing the capital gain derived from the sale of this type of product.

Here is a simulation made taking into account a contribution of 100,000 euros by an insured person over 70 years of age, requesting a monthly income of 313.92 euros per month, in which only 20% of the annual income received would be taxed as income tax:

Guaranteed monthly income:	313.93 €
Annualized income:	3,767.04 €
80% of tax exempt income:	3,013.63 €
20% is taxable return on movable capital:	753.41 €
Tax:	143.15 €
NET RETURN:	3,623.89 €

 

Ignacio Pellicer & Pedro Heredia

www.pellicerheredia.com

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