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V0587-18 1 March 2018 · SG de Tributación de las Operaciones Financieras Criterion in force
IRPF · rendimientos del trabajo

40% reduction may apply to pension plan benefits derived from contributions made prior to 2007

A taxpayer enquired whether the 40% reduction could be applied to the portion of their pension plan corresponding to contributions made before 2007 when requesting early withdrawal due to retirement. The Directorate General for Taxes (DGT) ruled that this is possible provided that all formal and temporal requirements are met, and that the contingency occurs once the requirements for early withdrawal are satisfied.

The question raised

Possibility of applying the 40 percent reduction to the amount received as a lump sum, for the portion corresponding to contributions made before 2007. Commencement of the period for applying said reduction.

The DGT's ruling

Pension plan benefits are considered earned income. If received as a lump sum, the 40% reduction may be applied to the portion of the benefit corresponding to contributions made until December 31, 2006, provided that more than two years have elapsed since the first contribution and it is received within the period established by the twelfth transitional provision. This reduction can only be applied once in the same tax period, regardless of the number of plans held by the taxpayer. To determine the period of receipt, the retirement contingency occurs at the moment the requirements for early withdrawal are met.

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