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V0588-24 9 April 2024 · SG de Tributación de las Operaciones Financieras Criterion in force
IRPF · rendimientos del trabajo

The 40% reduction on pension plan lump-sum withdrawals can only be applied once

A taxpayer enquired whether the 40% reduction applicable to contributions made prior to 2007 could be applied to multiple partial lump-sum withdrawals in different years. The Directorate General for Taxes (DGT) ruled that, as these withdrawals arise from the same contingency, the reduction may only be applied to a single withdrawal.

The question raised

Possibility of making several partial lump-sum withdrawals from the pension plan in different tax years, applying the 40 percent reduction provided for in the transitional regime to each withdrawal.

The DGT's ruling

Pension plan benefits are considered income from employment. The 40% reduction for contributions made until December 31, 2006, may only be applied to one of the benefits received as a lump sum arising from the same contingency. The beneficiary may choose in which tax year to apply said reduction, provided it is done within the period established by the twelfth transitional provision of the Personal Income Tax Law (LIRPF).

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