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V2054-17 31 July 2017 · SG de Tributación de las Operaciones Financieras Criterion in force
IRPF · rendimientos del trabajo

40% reduction applicable to pension plan withdrawals for contributions made before 2007

The inquirer asks whether the 40% tax reduction can be applied when withdrawing a pension plan as a lump sum if it includes contributions made prior to 2007. The Directorate General for Taxes (DGT) clarifies that this is possible for the portion of the benefit corresponding to those specific contributions, provided that all legal deadlines and requirements are met.

The question raised

Application of the 40 percent reduction.

The DGT's ruling

Pension plan benefits are considered earned income. The 40 percent reduction may be applied to the portion of the benefit corresponding to contributions made until December 31, 2006, if received as a lump sum or a mixed payment. This reduction can only be applied once per taxpayer in the same tax period, regardless of the number of plans held. The right to the reduction is subject to the receipt deadlines established in the twelfth transitional provision of the Personal Income Tax Law.

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