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V0530-17 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 retiree receiving income from a pension plan with contributions made prior to 2006 has enquired whether the remaining balance can be withdrawn as a lump sum applying the 40% reduction. The Directorate General for Taxes (DGT) has ruled that this is possible, provided the deadlines and requirements of the twelfth transitional provision are met.

The question raised

Application of 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 that it is received as a lump sum or a mixed payment. For contingencies occurring in 1997, the reduction may only be applied to benefits received until December 31, 2018. This reduction may only be granted once per tax period, regardless of the number of plans held by the taxpayer.

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