Impossibility of applying 30% withholdings on exempt disability pensions

The Directorate General of Taxes (DGT) has issued a relevant criterion regarding the management of Personal Income Tax (IRPF) withholdings for beneficiaries of disability pensions. The core of the issue lies in the possibility of requesting a withholding rate higher than the one legally established when the income received enjoys tax exemption.

What the DGT has resolved

The query concerned whether a taxpayer could request the application of a 30% withholding rate on an absolute disability pension. The advisory body has determined that such a request is not admissible.

The basis for this decision is the nature of the income. According to Article 7.f) of the IRPF Law, pensions for permanent disability in the degree of absolute disability or severe invalidity are exempt from taxation. Since these are exempt incomes, the paying entity is under no obligation to perform withholdings or make payments on account. Consequently, as there is no tax liability on that income, it is not possible to exercise the right to request a higher withholding rate.

What this means for you

If you receive a pension for absolute disability or severe invalidity, your income is exempt from IRPF taxation. This implies that the amount you receive is gross with respect to this tax, as no amount should be deducted as a withholding.

This criterion establishes a limit on the taxpayer's will: although one may wish to make advance payments on account through a higher withholding, the regulations do not allow for withholdings to be applied to income that is not subject to taxation. The exemption of the income therefore entails the non-existence of the base upon which such a withholding would be applied.

What you should do

It is necessary to verify the nature of the income received and its tax treatment according to the IRPF Law. Since this criterion directly affects the management of payments on account, it is recommended to analyze your particular situation to ensure that the treatment of your pensions complies with current regulations and to avoid errors in the management of your income.