Insurance-based savings and unit-linked policies in Spain (seguros de ahorro)

Terms used

• PIAS — The PIAS is a life insurance savings plan that gives exempt gains if you hold it 10 years and take a lifetime annuity.
• SIALP — The SIALP is a long-term savings insurance with a 5-year holding period and a €5,000 yearly limit.
• IRPF — The IRPF is Spain's personal income tax.
• Modelo 720 — The Modelo 720 is the declaration of assets held abroad, required when a category exceeds €50,000.

Key rules

• PIAS limits: You can pay up to €8,000 a year and €240,000 in total into a PIAS.
• SIALP limit: You can pay up to €5,000 a year into one SIALP and must keep it 5 years for the exemption.
• Unit-linked: Switching funds inside a qualifying unit-linked policy is not taxed; tax comes when you withdraw.
• Foreign bonds: A UK or Irish bond gets no special deferral and must be genuine insurance to defer tax.

The short answer

PIAS, SIALP and unit-linked policies can defer or exempt tax, but only if you meet their conditions. A foreign insurance bond gets no special deferral. It is taxed like other insurance, and only if it counts as genuine insurance.

PIAS: exempt gains if you take an annuity

A PIAS is a life insurance savings plan. You get no tax deduction when you pay in. The payoff comes at the end.

• You can pay in up to €8,000 a year and €240,000 in total per person.
• Hold it at least 10 years, then convert it into a lifetime annuity. The gains are then exempt from IRPF.
• Take the money as a lump sum instead, and the gains are taxed as capital income, with a reduction.
• If you do take an annuity, only a partial percentage of each payment is taxed.

SIALP: five years, smaller limit

A SIALP is a similar product with a shorter horizon. It is invested in deposits or equity.

• You can pay in up to €5,000 a year.
• Keep it for 5 years and the gains are exempt.
• Withdraw early and you lose the exemption. You must also correct the returns you earlier treated as exempt.
• You can hold only one SIALP at a time.

You cannot combine a PIAS and a SIALP to get around either limit. Many banks do not promote SIALPs, so you may need to ask for one by name.

Unit-linked policies: tax deferred until you withdraw

With a unit-linked policy, you choose the investments and carry the risk. Switching funds inside the policy is not taxed, so tax waits until you surrender the policy or receive a payout.

• Gains are taxed as capital income at the savings rates. These start at 19% and rise to 30% on the highest slice.
• On a partial withdrawal, tax applies only to the gain part of what you take out.
• Deferral works only if the policy is genuine insurance from a Spanish or EU insurer. You must not control the assets directly, and the investment must follow fixed conditions.

If you can trade freely inside the product, it may be treated as a direct investment and lose deferral. Ask the insurer to confirm in writing how the policy qualifies.

UK and Irish investment bonds

A bond from a foreign insurer is generally taxed as life insurance when you are Spanish resident. Gains are taxed when you surrender it, and you declare them in your annual return.

• Deferral is possible only if Spain treats the contract as real insurance. That needs an effective transfer of risk and no control by you over the investments. Offshore bonds often fail this test and are then treated as a direct investment.
• You must report the bond on Modelo 720 as insurance with a foreign insurer if the total in that category is over €50,000.

Get advice from a Spanish tax adviser before you buy one or when you arrive with one.

Which to choose

Use the decision, timeline and FAQ below to compare options. If you want simple, flexible investing with no conditions, a direct fund or shares may suit you better than any wrapper.

Choosing between options

Which kind of insurance-based savings fits you?

• Unit-linked policy: You want to switch funds freely without tax until you withdraw. You do not control the assets directly, and the insurer is Spanish or from the EU.

• Foreign insurance bond: You already hold a UK or Irish bond. Deferral is possible only if it counts as genuine insurance, and you must report it if the category is over €50,000.

• Direct investment fund or shares: You want to control the investments yourself. Then the policy gets no deferral and gains are taxed as a direct investment.

Tax is deferred until you withdraw only when the policy is genuine insurance and you do not directly control the assets. Gains are then taxed on the savings scale when you take money out.

Timeline and deadlines

• Pay into a SIALP, up to €5,000 a year: each year during the first 5 years

• Withdraw from a SIALP with the gains exempt: after holding it for at least 5 years

• Pay into a PIAS, up to €8,000 a year and €240,000 in total: each year until you reach the total limit

• Convert a PIAS into a lifetime annuity to keep the gains exempt: after holding it for at least 10 years

Frequently asked questions

Can I hold a PIAS and a SIALP at the same time?

Yes, you can hold both, but you cannot use one to get around the limits of the other. A PIAS allows up to €8,000 a year and €240,000 in total, while a SIALP allows €5,000 a year.

What happens if I take money out of a SIALP before 5 years?

If you withdraw from a SIALP before 5 years, you lose the tax exemption on the gains. You also have to correct the returns you declared in earlier years. Keep the policy for the full 5 years to keep the exemption.

Is switching funds inside a unit-linked policy taxed?

No, switching funds inside a unit-linked policy is not taxed at the time of the switch. Tax is due only when you withdraw, and a partial withdrawal is taxed on the gain part only.

Do I have to report a UK or Irish investment bond as a foreign asset?

Yes, you report it as insurance with a foreign insurer if the total in that category is over €50,000. You then pay tax on the gains in your annual return when you withdraw. If you control the investments, the tax authority may treat it as a direct investment instead.