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V2559-14 30 September 2014 · SG de Tributación de las Operaciones Financieras Criterion in force
IRPF · rendimientos del trabajo

The 40% reduction on pension plan benefits can only be applied once per tax period

A taxpayer inquired whether they could apply the 40% reduction for lump-sum pension benefits in one year for an individual plan, and in a subsequent year for an occupational plan. The Directorate General for Taxes (DGT) ruled that the reduction can only be applied once per tax period, regardless of how many different plans the taxpayer holds.

The question raised

Right to re-apply the 40 percent reduction to the lump-sum benefit received from the occupational pension plan in a future fiscal year, upon reaching retirement.

The DGT's ruling

Pension plan benefits are considered earned income. The 40% reduction for lump-sum payments may only be applied to the portion of the benefit corresponding to contributions made until December 31, 2006, provided that two years have elapsed since the first contribution. This reduction may only be granted to amounts received as a lump sum within the same tax period, at the taxpayer's discretion. Amounts received in other years shall be taxed without the reduction.

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