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V2780-23 10 October 2023 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · clases pasivas

Civil Service pensions are exempt from Income Tax if absolute incapacity occurs after retirement

The inquirer asked whether their Civil Service pension should be subject to Income Tax after obtaining absolute incapacity due to the worsening of an illness. The Directorate General for Taxes (DGT) ruled that the pension is exempt from taxation as it meets the requirements for exemption due to incapacity for service.

The question raised

Whether the pension currently being received is subject to Personal Income Tax (IRPF), and therefore, whether the corresponding withholding must be applied.

The DGT's ruling

Passive Class pensions due to disability are exempt from Personal Income Tax (IRPF) if the injury or illness completely disables the recipient from any profession or trade. According to the TEAC criterion, this exemption applies whether the disability occurs at the time of retirement or arises subsequently, prior to the compulsory retirement age, due to the worsening of the illness. In this case, as the absolute disability is recognized after retirement, the requirements of Article 7.g) of the LIRPF are met.

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