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V1812-18 20 June 2018 · SG de Tributación de las Operaciones Financieras Criterion in force
IRPF · rendimientos del trabajo

Pension plan benefits taxed as employment income based on enforceability

A query was made regarding the taxation and timing of pension plan benefit payments following the death of the holder. The DGT clarifies that these benefits are taxed under Personal Income Tax (IRPF) as employment income and that the timing of taxation depends on when they become enforceable, rather than the date of death.

The question raised

Temporal imputation of the benefits received from the pension plan by the heirs of the taxpayer. In particular, whether they can defer taxation if they decide to redeem the pension plan years after the death, and whether there is any temporal limitation for the redemption. Likewise, whether the applicable treatment is the same in the case of an insured welfare scheme.

The DGT's ruling

Benefits from pension plans and insured welfare schemes are taxed under Personal Income Tax (IRPF) as income from employment and are not subject to Inheritance and Gift Tax. The temporal imputation is governed by the moment the benefits become due to the recipient, rather than the occurrence of the contingency. To apply the 40% reduction for contributions made prior to 2007, the time limits set forth in the twelfth transitional provision of the LIRPF must be met.

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