Taxation of compensatory pensions and pension plan withdrawals after divorce

The management of income derived from marital breakdown raises complex questions in the field of Personal Income Tax (IRPF). Recently, the Dirección General de Tributos (DGT) has issued a relevant criterion regarding the taxation of compensatory pensions and the possibility of splitting pension plan withdrawals between ex-spouses.

What the DGT has resolved

The inquiry focused on two key points. First, the application of the reduction provided for in Article 55 of the IRPF Law regarding amounts paid as compensatory pensions after retirement. Second, the possibility of allocating and imputing the income obtained from the withdrawal of pension plans 50/50 between both ex-spouses.

The DGT has established that the income received from the withdrawal of pension plans must be taxed entirely in the beneficiary listed as such in the plan. The allocation or imputation of this income 50/50 between ex-spouses for the purpose of optimizing the tax burden is not legally viable, as the ownership of the benefit responds to the status of beneficiary recognized in the plan contract.

What this means for you

This criterion has a direct impact on individuals who, following a divorce process, must manage the payment of compensatory pensions or the withdrawal of pension funds. If you are a beneficiary of a pension plan, the regulations require that the entirety of the income received be imputed in your name, without the possibility of sharing the tax impact with your ex-spouse, even if a prior agreement on the division of benefits exists.

What should be done

In situations involving the liquidation of assets after a divorce, it is necessary to verify the ownership of each benefit and pension plan. The correct imputation of income is fundamental to avoid contingencies with the Tax Administration. Given the specificity of the obligations derived from the Civil Code and the IRPF Law, it is recommended to assess each particular situation to ensure that the management of withdrawals and compensatory pensions strictly complies with current regulations.