The Supreme Court (TS) rejects that life insurance unit linked are taxed by the Wealth Tax as long as the policyholder does not have the right of redemption during the term of the contract. The position of the high court It only affects the years prior to 2021since in July of that year the tax law was modified to establish that life insurance in which the policyholder does not have the right to surrender will be computed in the tax base of Patrimony for the value of the mathematical provision. Until then there was a legal vacuum in this regard.
life insurance unit linked They are investment products that guarantee coverage in the event of death and in which the contribution made by the policyholder goes partly to pay the premium and partly to invest in different funds. The person who hires you assumes the risk of these investments, so you may lose part of your savings.
From PwC Tax & Legal, the firm that acted as legal counsel in these two Supreme Court rulings of October 14, they highlight that the high court, following the jurisprudence of the Court of Justice of the European Union (CJEU), recognizes that this type of insurance which are characterized by combining death or survival coverage with an investment purpose, cannot be compared to other ordinary life insurance policies, which do not have an investment component.
Adal Salamanca, partner in the Tax Procedures area of PwC Tax & Legal and Lucía Coto González, partner in the Large Wealth and Family Business area, indicate that the Supreme Court is based on the literal wording of article 17.1 of the Wealth Tax Law, in its original wording, which established that life insurance would be computed at its surrender value at the time of accrual of the Tax. “Since there is no surrender value in the case of insurance unit linkedthe Supreme Court concludes that it is not possible to integrate it into the tax base of the Wealth Tax any amount related to said insurance,” they explain.
Likewise, they highlight that the rulings represent important support for taxpayers who have this product without the right of redemption and who are currently discussing their wealth taxation with the treasury in the years prior to 2021.
The Supreme Court thus opens the door for taxpayers who are in these cases to recover the amount paid for these insurances in the Wealth Tax.
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