Beneficiaries of the 40% reduction lose the right if they did not apply it in 2023

The application of tax benefits for the withdrawal of funds from pension plans or consolidated rights requires strict compliance with the time limits established by current regulations. An error in calculating the application period can lead to the definitive loss of the tax reduction provided for retirement.

What the DGT has resolved

The Dirección General de Tributos (DGT) has determined that the early withdrawal of rights consolidated by ten years of seniority receives the same tax treatment as benefits from pension plans. In this sense, if the participant has already retired, the amount received is classified as a retirement benefit.

In order to apply the 40% reduction contemplated in the twelfth transitional provision of the Personal Income Tax (IRPF) Law, the contingency must be received within the legal deadlines linked to the year in which it occurred. In the case analyzed, since the retirement occurred in the 2021 fiscal year, the maximum period to exercise this tax right ended on December 31, 2023.

What it means for you

If you are an individual receiving benefits from pension plans or consolidated rights, you must take into account that the 40% reduction is not a permanent right, but is subject to a specific time window. If your contingency (retirement, disability, etc.) occurred in 2021, any withdrawal made from January 2024 onwards will not be able to benefit from this tax saving, as the legal deadline has concluded.

What you should do

It is necessary to verify the exact date on which the contingency allowing the redemption of the funds occurred. Once the date is identified, it must be confirmed whether the redemption was carried out within the deadlines set by law for that specific year. In case of doubt regarding the application of the reduction in the withdrawal of consolidated rights, it is fundamental to analyze the particular situation to avoid IRPF settlements higher than expected.