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V0507-19 11 March 2019 · SG de Tributación de las Operaciones Financieras Criterion in force
IRPF · rendimientos del trabajo

40% reduction on pension plan lump sum withdrawals may apply under transitional rules

A taxpayer inquired whether they could apply the 40% tax reduction when withdrawing their pension plan as a lump sum upon retirement. The Directorate-General for Taxes (DGT) ruled that this is possible for contributions made up to 2006, provided the deadline for receipt is respected based on the date of the contingency.

The question raised

Taxation of pension plan benefits in the event of redemption as a lump sum and the possibility of applying the 40 percent reduction.

The DGT's ruling

Pension plan benefits are considered earned income. The 40% reduction may be applied to the portion of the benefit corresponding to contributions made until December 31, 2006, provided it is received as a lump sum and the period specified in the twelfth transitional provision is met. The retirement contingency occurs upon accessing retirement or, in the case of early withdrawal, when the requirements for such withdrawal are met. For contingencies occurring in 2013, the period for applying the reduction ends on December 31, 2021.

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