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V5018-16 18 November 2016 · SG de Tributación de las Operaciones Financieras Criterion in force
IRPF · rendimientos del trabajo

The 40% reduction for contributions made before 2007 can only be applied in a single tax year

A taxpayer inquired whether the 40% reduction for contributions made prior to 2007 could be applied across two different tax years upon redeeming their pension plan. The Directorate General of Taxes (DGT) ruled that the reduction may only be applied to amounts received as a lump sum within the same tax period.

The question raised

Possibility of applying the 40 percent reduction to the amounts received in the two fiscal years, for the portion corresponding to contributions made before 2007.

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 corresponding to contributions made until December 31, 2006. However, this reduction may only be granted to amounts received within the same tax period, at the taxpayer's discretion. Amounts received in other years shall be taxed in full without said reduction.

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