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V0230-21 10 February 2021 · SG de Tributación de las Operaciones Financieras Criterion in force
IRPF · rendimientos del trabajo

Potential application of the 40% reduction on pension plan benefits received as a lump sum

The inquirer asks whether they can make contributions to a pension plan and if the 40% reduction can be applied following the death of the participant. The DGT states that authority over contributions lies with the Directorate General of Insurance and Pension Funds and explains the conditions for the tax reduction.

The question raised

Possibility of making contributions to the pension plan. Possibility of applying the 40 percent reduction.

The DGT's ruling

Pension plan benefits are considered income from employment and must be included in the general taxable base of the Personal Income Tax (IRPF). If the benefit is received as a lump sum, a 40% reduction may be applied provided that more than two years have elapsed since the first contribution and it is received within the timeframes established in the twelfth transitional provision of the Personal Income Tax Law (LIRPF). This reduction is applicable to the portion of the benefit received as a lump sum, even if payments of different types are combined.

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