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V3184-20 22 October 2020 · SG de Tributación de las Operaciones Financieras Criterion in force
IRPF · rendimientos del trabajo

40% pension scheme redemption reduction applicable if received within the legal timeframe

A long-term unemployed taxpayer inquired whether the 40% reduction could be applied when redeeming contributions made prior to 2007. The Directorate General of Taxes (DGT) ruled that if the redemption is carried out as a retirement advance, it is classified as a retirement contingency, allowing the reduction to be applied provided the requirements of the twelfth transitional provision are met.

The question raised

Possibility of applying the 40 percent reduction.

The DGT's ruling

Pension plan benefits are considered earned income. If the retirement benefit is received in advance, the contingency occurs when the requirements for such early collection are met. The 40 percent reduction is applicable 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 period established in the twelfth transitional provision of Law 35/2006. This reduction can only be applied once, within the same tax period, regardless of the number of pension plans held by the taxpayer.

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