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V0818-25 16 May 2025 · SG de Tributación de las Operaciones Financieras Criterion in force
IRPF · rendimientos del trabajo

Pension payments as employment income cannot benefit from 40% reduction

The consultant asks about the taxation of employment pension benefits received as assured income. The DGT responds that such benefits are considered earnings from work and that the 40% reduction only applies when received as capital.

The question raised

Taxation of the benefit to be received in the form of an assured annuity.

The DGT's ruling

Pension plan benefits are considered earned income and must be included in the general taxable base of Personal Income Tax (IRPF). The 40 percent reduction for contributions made up to 2006 can only be applied if the benefit is received as a lump sum or by combining payments with one in the form of a lump sum. Therefore, if the benefit is received entirely as an annuity, said reduction cannot be applied.

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