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V0181-20 27 January 2020 · SG de Tributación de las Operaciones Financieras Criterion in force
IRPF · rendimientos del trabajo

Possibility of applying the 40% reduction to lump-sum pension plan withdrawals upon retirement

A retiree has enquired whether the 40% tax reduction can be applied to amounts withdrawn from their pension plan upon retirement. The Tax Agency clarifies that, as retirement is a contingency distinct from unemployment, lump-sum withdrawals may benefit from the reduction provided the established timeframe is met.

The question raised

Possibility of applying the 40 percent reduction to amounts received as a lump sum due to the retirement contingency.

The DGT's ruling

Pension plan benefits due to retirement are considered earned income. If received as a lump sum, the 40% reduction is applicable pursuant to the twelfth transitional provision of the Personal Income Tax Law (LIRPF). For a contingency occurring in 2014, the period for applying this transitional regime expires on December 31, 2022.

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