C 2. Benefits received in the form of capital derived from other private social security systems (pension plans, social security mutual societies and insured pension plans)

Clarifications:

• The reduction applicable to benefits in the form of capital derived from pension plans or insured pension plans refers to those received in respect of the same contingency .

  When benefits are received from various pension plans, the 40 or 50 percent reductions indicated above may be applied to all amounts received in the form of a lump sum (single payment) in the year in which the corresponding contingency occurs and in the two following years, and not just in one year, for the part corresponding to contributions made up to December 31, 2006. See the Resolution of the Central Economic-Administrative Court (TEAC), dated October 24, 2022, Claim number 00-08719-2021, issued in an extraordinary appeal for the unification of criteria.

  In the specific case of mobilizing part of the consolidated rights of a pension plan to give rise to several pension plans, the aforementioned TEAC resolution makes no mention whatsoever of the application of the reduction provided for in the transitional regime in the case of several pension plans derived from another. However, in general, it can be inferred from the content of the resolution that the fact that some mobilization had taken place prior to receiving the benefit would not prevent the application of the criterion set out. However, if the transfer of vested rights is not carried out for the purpose of said operation, but for the sole fiscal purpose of applying the reduction of the transitional regime in several years, the provisions of articles 15 and 16 of the General Tax Law could apply.

• 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 mutualsThe reduction percentage is applied to the portion of the total amount received corresponding to contributions made up to December 31, 2006 (for benefits arising from contingencies occurring after January 1, 2015, in the year in which the corresponding contingency occurs, or in the following two years), except in those cases where the total employment income is determined by the difference between the amount received and the contributions that could not be reduced or decreased in the taxable base of the IRPFABBR .

• If the benefits from pension plans 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 before December 31, 2006, including their profitability, and which corresponds to contributions made after this date.

Partial redemption of a pension plan in exceptional cases of disposal of vested rights in cases of serious illness or long-term unemployment and, subsequently, due to retirement

Article 9 of the Regulation on pension plans and funds, approved by Royal Decree 304/2004 of 20 February, establishes that, exceptionally, the rights consolidated in pension plans may be exercised in whole or in part in cases of serious illness or long-term unemployment in accordance with the provisions of this article, provided that this is expressly provided for in the specifications of the pension plan and subject to the conditions and limitations established therein.

The possibility of applying the 40 percent reduction is conditional on the benefits being received within a certain period, the end of which depends on the fiscal year in which the contingency occurs.

For these purposes, the exceptional liquidity situation must be understood to have occurred when all the requirements established by pension plan regulations are met in order to be able to exercise the vested rights (being legally unemployed, having exhausted unemployment benefits at their contributory level or not being entitled to them, and being registered as a job seeker). In the case of retirement, it should be understood that, as a general rule, the retirement contingency occurs at the time of accessing retirement under the corresponding Social Security system.

Therefore, since retirement is a contingency distinct from the exceptional cases of disposition of vested rights in pension plans, the aforementioned 40% reduction is applicable in both cases, except in cases where, for tax purposes, the collection of the retirement benefit is deemed to be early.

Remember that the early disposal, in whole or in part, of the consolidated rights in pension plans and similar supplementary social security systems will only be allowed in the exceptional cases of liquidity provided for in article 8.8 of the consolidated text of the Law on the Regulation of Pension Plans and Funds (long-term unemployment, serious illness and from 2025 onwards for contributions with at least 10 years of age).

Assumption of early disposal of vested rights corresponding to contributions made at least ten years ago(art. 8.8 and DT 7 TRLPRPFP; art. 9.4 and DT 7 RPFP) and, subsequently, due to retirement.

From 1 January 2025, the consolidated rights derived from contributions made to pension plans and similar supplementary social security systems made up to 31 December 2015 will be available, with the corresponding returns in accordance with the seventh transitional provision of Royal Legislative Decree 1/2002, of 29 November, which approves the consolidated text of the Law on the Regulation of Pension Plans and Funds.

In these cases, the application of the 40 percent reduction to pension plan benefits received in the form of capital, provided for in the twelfth transitional provision of the Personal Income Tax Law, will be possible provided that the requirements for its application are met.

Regarding the moment when the early disbursement is considered to have occurred, it is a necessary condition not only that at least 10 years have passed to understand this exceptional case of liquidity to have occurred, but also that the early disbursement is expressly requested by the participant.

Consequently, for the purposes of determining the period in which the benefit must be received in the form of capital for the application of the reduction derived from the twelfth transitional provision of the Personal Income Tax Law, it must be considered that the case of early disbursement occurs in the year in which the requirement of seniority of the contributions is met (lapse of 10 years) and, in addition, the disbursement has been expressly requested by the participant.

For tax purposes, the early withdrawal scenario will occur in the same year for all pension plans corresponding to the same participant that at that time have contributions made at least ten years ago.

According to section 4 of the twelfth transitional provision of the Personal Income Tax Law, the application of the 40 percent reduction is conditional upon the benefits being received within a certain period, the end of which depends on the year in which the early provision is understood to have occurred. As noted, once it has been determined that the year in which the early withdrawal is understood to have occurred is the one in which the requirement of seniority of the contributions is met and, in addition, the participant expressly requests the withdrawal, the reduction derived from the transitional regime may be applied in that year or in the following two years, under the terms provided for in said transitional provision.

Finally, considering that the primary purpose of pension plans is to address the contingencies referred to in Article 8.6 of Royal Legislative Decree 1/2002, of November 29, which approves the consolidated text of the Law on the Regulation of Pension Plans and Funds, in the event that the consolidated rights in pension plans can be accessed in advance because they correspond to contributions made at least ten years ago and simultaneously the benefit could be received due to the occurrence of some contingency, for tax purposes it would be understood that the benefit corresponding to said contingency is received. Therefore, if the 40 percent reduction were applied, it could not be applied again later due to the same contingency.

Furthermore, if the vested rights in pension plans can be accessed early because they correspond to contributions made at least ten years ago, and the requirements for collecting vested rights under the exceptional liquidity circumstances of serious illness or long-term unemployment provided for in the pension plan regulations are met simultaneously, if the 40 percent reduction for the early accession of vested rights is applied, the 40 percent reduction for the exceptional liquidity circumstance that occurs will subsequently be applicable, provided that the provisions of the twelfth transitional provision of the Personal Income Tax Law are met and, in particular, that the amounts are received within the period indicated therein.