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V0982-19 8 May 2019 · SG de Tributación de las Operaciones Financieras Criterion in force
IRPF · rendimientos del trabajo

UK pension scheme payments are taxable in Spain and may qualify for the 40% reduction

A resident in Spain has requested a ruling regarding the taxation of a lump-sum withdrawal from a UK pension scheme due to long-term unemployment. The Directorate General for Taxes (DGT) has determined that the income is only taxable in Spain and that the 40% reduction may apply to the portion of contributions made up to 2006, subject to certain time limits.

The question raised

Taxation of the benefit. Possibility of applying the 40 percent reduction.

The DGT's ruling

Income derived from a United Kingdom pension plan is taxed exclusively in Spain as employment income. If received as a lump sum, the 40% reduction may be applied to the portion corresponding to contributions made until December 31, 2006. This reduction requires that more than two years have elapsed since the first contribution and that it is received within the timeframes established by the twelfth transitional provision. The period for applying this transitional regime depends on the fiscal year in which the contingency occurs, understanding liquidity due to long-term unemployment as the moment when the requirements to exercise the rights are met.

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