Skip to content
Back to index
V3796-16 9 September 2016 · SG de Tributación de las Operaciones Financieras Criterion in force
IRPF · rendimientos del trabajo

The 40% pension plan reduction for pre-2007 contributions can only be applied once per tax year

An unemployed taxpayer inquired whether they could apply the 40% reduction when redeeming part of their pension plans and then apply it again in the future. The Directorate General of Taxes (DGT) ruled that, if the redemption is classified as a retirement contingency, the reduction can only be applied once within the same tax period.

The question raised

Possibility of redeeming all or part of pension plan rights prior to retirement, regarding the portion corresponding to contributions made until December 31, 2006. In the event of a partial redemption applying the 40 percent reduction, whether there is a right to apply said reduction again to amounts received in a future tax year upon reaching retirement.

The DGT's ruling

Pension plan benefits constitute earned income. If received as a lump sum, the 40% reduction may be applied to the portion of the benefit corresponding to contributions made until December 31, 2006. However, this reduction may only be granted to amounts received as a lump sum within the same tax period, at the taxpayer's election. Amounts received in other years shall be taxed without said reduction.

Book your free first meeting