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V2970-19 24 October 2019 · SG de Tributación de las Operaciones Financieras Criterion in force
IRPF · derechos consolidados

The 40% reduction may apply to the lump sum portion of pension plan benefits

The inquirer asks whether the 40% reduction can be applied when receiving pension plan benefits due to serious illness in a mixed form (lump sum and income). The Directorate General for Taxes (DGT) responds that the reduction applies to the portion received as a lump sum, and that the condition of serious illness is deemed to have occurred once the requirements to exercise the rights are met.

The question raised

Possibility of applying the 40 percent reduction if benefits are received in a mixed form.

The DGT's ruling

Pension plan benefits are considered income from employment. If received as a lump sum, the 40% reduction is applicable pursuant to the twelfth transitional provision of the Personal Income Tax Act (LIRPF). In the event of mixed receipt, the reduction applies only to the portion received as a lump sum. The circumstance of serious illness is understood to have occurred at the moment the requirements to exercise consolidated rights are met.

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