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V1264-17 24 May 2017 · SG de Tributación de las Operaciones Financieras Criterion in force
IRPF · rendimientos del trabajo

Eligibility for the 40% reduction on pension plan benefits received as a lump sum

The inquirer asks whether the 40% reduction can be applied to retirement benefits from their pension plans. The Directorate General for Tax (DGT) clarifies that this reduction applies to the portion of the benefit corresponding to contributions made up to 31 December 2006, provided it is received as a lump sum and legal time limits are met.

The question raised

Possibility of applying the 40 percent reduction.

The DGT's ruling

Pension plan benefits are considered earned income. If received as a lump sum, a 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 timeframes established by the twelfth transitional provision. This reduction can only be applied once per tax year, regardless of the number of pension plans held by the taxpayer. If the benefit is received as an annuity, the reduction cannot be applied.

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