Individuals who are tax resident in Spain and receive benefits from a German occupational pension scheme must generally also consider the Spanish tax treatment of those benefits. One particularly important question is whether a lump-sum payment is treated as employment income for Spanish Personal Income Tax (IRPF) purposes and whether a tax reduction may be available.
30% reduction under Article 18 LIRPF
Article 18(2) of the Spanish Personal Income Tax Law (LIRPF) provides, subject to certain conditions, for a 30% reduction in taxable income. This may be particularly relevant in the case of income generated over a period of more than two years and which is not received on a regular or recurring basis.
Among other requirements, it should be noted that qualifying income must generally be allocated to a single tax period. In addition, the amount to which the reduction may be applied is subject to a statutory limit.
Individual assessment before choosing the form of payment
The potential application of the 30% reduction should therefore always be assessed on an individual basis before choosing the form of payment. The mere fact that a German occupational pension entitlement has accrued over a long period does not in itself mean that the reduction under Article 18 LIRPF will apply.
Particularly in the case of substantial pension benefits, it may be advisable to assess the Spanish tax treatment and the different payment options before making a final decision.
Our law firm will be pleased to assist you in analysing your individual situation, handling any necessary administrative procedures on your behalf and assisting you with the preparation and filing of the relevant tax returns. If you are interested in our services or have any specific questions regarding this matter, please feel free to contact us by email or telephone.
Author:
Lisa Wörfel
Tax Advisor
info@sspartners.es
Tel: (+34) 951 12 13 06
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