Benefits received in the form of capital derived from other private social security systems (pension plans, social security mutual societies and insured pension plans)

Regulations: twelfth transitional provision of the Personal Income Tax Law

Recipients of benefits derived from contingencies occurring after January 1, 2011, may apply the reduction regime in force on December 31, 2006, but only to the part of the benefit corresponding to contributions made up to that date (December 31, 2006).

This regime consisted of the possibility PIT to apply the following reductions:

1. 40% reduction in the following cases:

   • When more than two years have passed since the first contribution.
   • When they correspond to disability benefits, regardless of the period of time elapsed since the first contribution.
2. 50% reduction for benefits received in the form of capital by persons with disabilities from social security systems established in their favour, provided that more than two years have passed since the first contribution.

Clarifications

• The reduction applicable to benefits in the form of capital derived from pension plans or insured pension plans refers to all pension plans and insured pension plans subscribed to by the same participant and in respect of the same contingency . Thus, regardless of the number of pension plans held by a taxpayer, the possible application of the aforementioned reduction of 40 or 50 percent may only be granted to the amounts received in the form of capital in the same tax period, and for the part that corresponds to the contributions made up to December 31, 2006. The remaining amounts received in other years, even if received in the form of capital, will be taxed in full without applying the reduction.

  However, in the event of receiving in the form of capital benefits derived from a pension plan and from a social security mutual fund for the same contingency , the application of the reduction will refer to the benefit from the pension plan and from the social security mutual fund independently.

• In the case of retirement or disability benefits received from social security mutual funds, the reduction percentage is applied to the part of the total amount received corresponding to contributions made up to 31 December 2006 (for benefits derived from contingencies occurring after 1 January 2011), except in those cases in which the total income from work is determined by the difference between the amount received and the contributions that could not have been subject to reduction or decrease in the taxable base of the PIT .
• If pension plan benefits are received in a mixed form (income and capital), the beneficiary may freely identify or decide which part of the benefit received in the form of capital corresponds to contributions made prior to December 31, 2006, including their profitability, from the part of the benefit that corresponds to contributions made after this date.

Note: As of 1 January 2015, the application of the reductions of the transitional regime is limited to benefits in the form of capital received within the periods indicated in the following section.