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V3119-17 30 November 2017 · SG de Tributación de las Operaciones Financieras Criterion in force
IRPF · rendimientos del trabajo

40% pension plan reduction applicable if benefits are received within the legal timeframe

An unemployed taxpayer inquired whether the 40% reduction under the transitional regime could be applied when redeeming pension plans as a lump sum. The Directorate General for Taxes (DGT) clarified that, if the redemption is due to early retirement, the contingency occurs once the requirements for such payment are met.

The question raised

Deadline for applying the 40 percent reduction provided for in the transitional regime to the benefit received as a lump sum.

The DGT's ruling

Pension plan benefits are considered earned income. The 40% reduction may be applied to the portion of the benefit corresponding to contributions made until December 31, 2006, provided that it is received as a lump sum and within the time limits set forth in the twelfth transitional provision. If retirement is taken early, the contingency is deemed to have occurred at the moment the requirements for such early retirement are met.

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