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V3188-18 14 December 2018 · SG de Tributación de las Operaciones Financieras Criterion in force
IRPF · rendimientos del trabajo

40% reduction on pension plan benefits may apply if legal time limits are met

A beneficiary has enquired whether the 40% reduction on pension plan benefits can be applied following the death of the previous beneficiary. The Directorate-General for Insurance and Pension Funds (DGT) clarifies that the reduction applies to the portion of the benefit corresponding to contributions made up to 31 December 2006, provided it is received within the established timeframes.

The question raised

Possibility of applying the 40 percent reduction.

The DGT's ruling

Pension plan benefits are considered earned income and are subject to taxation under the beneficiary's Personal Income Tax (IRPF). If received as a lump sum, a 40% reduction may be applied to the portion of the benefit corresponding to contributions made until December 31, 2006. To qualify, more than two years must have elapsed since the first contribution, and the receipt must occur within the timeframes established by the twelfth transitional provision of the Personal Income Tax Law (LIRPF).

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