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V0529-17 2 March 2017 · SG de Tributación de las Operaciones Financieras Criterion in force
IRPF · rendimientos del trabajo

40% reduction applicable to pension plan withdrawals for contributions made up to 2006

A taxpayer has enquired whether the 40% reduction can be applied when withdrawing part of their consolidated rights from a pension plan as a lump sum, provided the contributions were made prior to 2007. The Directorate General for Taxes (DGT) clarifies that this is possible, provided the deadlines and requirements set out in the twelfth transitional provision of the Personal Income Tax Law are met.

The question raised

Application of the 40 percent reduction.

The DGT's ruling

Pension plan benefits are considered earned income. If received as a lump sum, a 40% reduction may be applied to the portion corresponding to contributions made until December 31, 2006, provided that more than two years have elapsed since the first contribution and they are received within the period established in the twelfth transitional provision. This reduction can only be applied to amounts received as a lump sum within the same tax period, at the taxpayer's discretion.

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