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V1305-23 16 May 2023 · SG de Tributación de las Operaciones Financieras Criterion in force
IRPF · rendimientos del trabajo

40% pension plan reduction may apply if benefits are received before the legal deadline expires

A retiree has enquired whether the 40% reduction can be applied when redeeming pension plans as a lump sum during 2023, 2024, and 2025. The Directorate General of Taxes (DGT) clarifies that the timeframe for applying this transitional regime depends on when the retirement contingency occurred.

The question raised

Possibility of applying the 40% reduction provided for in the transitional regime during the 2023, 2024, and 2025 tax years.

The DGT's ruling

Pension plan benefits are considered earned income. The 40% reduction may be applied to the portion of the benefit corresponding to contributions made until December 31, 2006, provided that it is received as a lump sum and within the period established by the twelfth transitional provision of the Personal Income Tax Law (LIRPF). For contingencies occurring from 2007 onwards, the period for receiving benefits and applying the reduction is the tax year of the contingency or the two following years. In this case, as retirement occurred in 2021, the period expires on December 31, 2023.

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