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A query was raised regarding whether replacing a periodic compensatory pension with a single lump sum payment allows for a tax reduction. The Directorate General for Taxes (DGT) has ruled that the 40% reduction is applicable, as it is considered income obtained in a notoriously irregular manner.
Taxpayers receiving a lump sum in lieu of periodic compensatory pensions can benefit from a 40% reduction on employment income tax, provided the payment is classified as notoriously irregular income.
The tax team reviews your specific situation.
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