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V5367-16 19 December 2016 · SG de Tributación de las Operaciones Financieras Criterion in force
IRPF · rendimientos del trabajo

Potential application of the 40% reduction on pension plan benefits received as a lump sum

The inquirer asks about applying the 40% reduction to contributions made prior to 2007 when redeeming pension plans due to unemployment or retirement. The Directorate General for Taxes (DGT) clarifies that, provided requirements are met, the reduction applies to the portion of contributions made up to 2006, as long as it is received as a lump sum and within the legal timeframes.

The question raised

Application of the 40 percent reduction to amounts received as a lump sum in the two aforementioned scenarios, for the portion corresponding to contributions made prior to 2007. Time limit for applying the reduction.

The DGT's ruling

Pension plan benefits are considered earned income. If received as a lump sum, a 40% reduction may be applied to the portion corresponding to contributions made until December 31, 2006, provided that more than two years have elapsed since the first contribution. This reduction can only be applied once per taxpayer in the same tax period, regardless of the number of plans held. The deadline for applying this transitional regime depends on the fiscal year in which the contingency occurs.

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