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V1632-17 22 June 2017 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · exención

Social Security invalidity pensions are exempt, but mutual fund pensions are taxed as employment income

A taxpayer inquired about the tax treatment of two different invalidity pensions: one from Social Security and another from an architects' mutual fund. The Directorate General for Taxes (DGT) ruled that the Social Security pension is exempt, whereas the mutual fund pension must be included in the taxable base as employment income.

The question raised

How both pensions must be reflected in the Personal Income Tax return, and what is the limit of the exempt amount.

The DGT's ruling

Benefits for absolute permanent disability or severe invalidity from the Social Security system are exempt from Personal Income Tax (IRPF). However, benefits from mutual insurance societies that do not act as an alternative to the special Social Security regime do not enjoy this exemption. The latter are taxed as income from employment for the amount exceeding the contributions that have not been subject to reduction or diminution in the tax base.

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