Assured Future Plan, PPA

Residents

Personal income tax

• The taxation of pension plans is based on the deferral of the tax payable, corresponding to the amounts saved, until these are used.

1. Contributions

• Contributions made to the pension plan are reduced directly from the taxable base, with the maximum annual amount being deductible from the maximum contribution permitted. This is the greater of the following:

   

  • 30% of the sum of net yields received individually on business activities during the year (50% for taxpayers over the age of 50) or,
    
  • 10,000 euros annually (for taxpayers over the age of 50, this amount will be 12,500 euros per year).
  
  
• In joint tax statements these maximum limits are applied individually to each spouse.
• Contributions may also be made in favour of the spouse, provided the latter does not obtain net income from work or economic activities greater than 8,000 euros. In this case, they may be deducted from the tax base with an upper limit of 2,000 euros a year (*).

(*) This is a joint limit for the different social benefit systems: pension plans and social benefits schemes and social benefits mutual entities..

• There is a single limit on the contributions to social benefits systems (pension plans, social benefit mutual entities, assured benefits plans, corporate benefit plans and major dependency insurance).
  

An example of tax savings, taking into account the PIT tax bracket scale in force for 2010 :

* Annual maximum contribution to a pension plan for persons aged over 50 .

• This reduction will be applied to the general part of the tax base. Under no circumstance may this be negative due to the application of these reductions.
• In addition, if there is still a remainder the participants may request that the sums contribution which did not reduce the tax base on the current year do so in the following five years.
• When there are simultaneous excesses of the current year with those of previous years, those from previous years are reduced first.
• In this respect it should be noted that with regard to the sums contributed to pension plans prior to 1 January 2007 and to the various benefits systems, the sums contributed which could not be reduced in the tax base as it was too low may be reduced in the 5 following years but with the difference that said reductions will not be subject to the percentage reduction limit mentioned above
• As from 1 January 2007 the Law on Personal Income Tax provides that as from the time of retirement, the participant may continue to make contributions to the pension plan for retirement. However, once the retirement benefit is collected or early collection of the retirement benefit the contributions may only be made for death and dependency contingencies.

Benefits

• The benefits from pension plans are included as earned income for Income Tax purposes both of receipt of same is due to retirement or disability or death (in the latter case the benefit will be received by the beneficiaries designated by the participant).
• There are two types of benefit:

In the form of income:
The total benefits received in the form of income are included each year as part of the earned income.

In the form of capital:
The total amount of the benefit is included in the year it is received as earned income. However, as from 1 January 2007 the 40% allowance for benefits received in the form of capital has been eliminated when over two years have elapsed between the first contribution and collection of same.

• There is a Transitory system via which the 40% allowance is maintained in the following cases.
• When the contingency has occurred before 1 January 2007
  For contingencies occurring subsequent to 1 January 2007 although only that part of the benefit which corresponds to contributions made before said date.
• At the time of payment, these amounts are subject to tax withholding. The percentage of the withholding applicable in each case will be determined in accordance with the amount subject to taxation and the personal situation of the recipient.

Inheritance tax

• In the event of the holder’s death, his beneficiaries will pay personal income tax as earned income as indicated above. They will not pay Inheritance and Gift Tax