WHAT ARE THE BENEFITS?
Security
Maintain and enjoy your current standard of living when you retire.
Flexibility
You can modify the amount of your contributions, the frequency, make extraordinary contributions or temporarily discontinue them without losing your vested rights.
Reduce IRPF income tax
Pension plan contributions directly reduce your IRPF taxable income base, as the maximum annual deductible amount being the lower of the following amounts: €8,000 per year or 30% of the sum of income earned and generated from professional or business activity.
Spouses of taxpayers who do not receive an income or whose annual income falls below the income threshold of €8,000 can reduce their taxable income with the contributions of their spouse, up to a limit of €2,500 per year.
Disabled taxpayers have an individual contribution limit of €10,000 per year, although the overall contribution limit together with their families is €24,250 per year.
Excess contributions that could not be deducted, either due to insufficient general taxable income or because they exceed the 30% limit, can be passed on to the following five fiscal periods, respecting the same limits on those years.
Taxation of benefits
Benefits received by pension plan beneficiaries are included in the general IRPF taxable income and have the tax status of earned income. They are not subject to Inheritance Tax
Transitory regime applicable to the benefits
The 2015 reform of the IRPF maintains the 40% reduction of benefits from pension plans, mutual insurance companies and assured savings plans, in the form of capital gains from contributions more than two years old, for contributions made until 31 December 2006. However, temporary limits are made on their application:
For contingencies occurring from 1 January 2015, the 40% reduction can be applied when benefit payment is requested in the same fiscal year when the contingency occurs or within the following two fiscal years.
Contingencies occuring before 1 January 2015 are classified in two categories:
- For contingencies occurring between 2011 and 2014, the transitory regime can only be applied, where appropriate, to benefits received up to the end of the eighth fiscal year following that in which the contingency occurred.
- For contingencies occurring in or before 2010, the transitory regime can only be applied, where appropriate, to benefits received until 31 December 2018.
In this way, the application of the 40% reduction is subject to a calendar that can be outlined in the following way:
In or before 2008: maximum period for payment 31 December 2018.
Year 2009: maximum period for payment until 31 December 2018.
Year 2010: maximum period for payment until 31 December 2018.
Year 2011: maximum period for payment until 31 December 2019.
Year 2012: maximum period for payment until 31 December 2020.
Year 2013: maximum period for payment until 31 December 2021.
Year 2014: maximum period for payment until 31 December 2022.
Year 2015 or later: maximum period for payment until 31 December of the fiscal year in which the contingency occurs + 2 years.
New scenario of pension plan distribution
The 2015 reform of the IRPF Personal Income Tax establishes the option to receive advanced payment of the corresponding vested rights to contributions at least 10 years old for certain social security instruments, including pension plans. With regard to the existing vested rights at 31 December 2015, payment is permitted from 1 January 2025.
