Tax — Pension contributions and personal income tax
Archive article, published in 2020. Its content reflects the context at that time.
According to the Supreme Court judgment of 5 November 2020, the taxable amount of pension plan benefits may be reduced by contributions that did not previously reduce the taxable base.
An individual had made annual contributions to a pension plan but had never deducted them from their personal income tax base. On receiving the pension benefit, the individual reduced the income reported in their self-assessment by the contributions previously made. The tax authorities argued that the law does not allow income from a pension plan withdrawal to be reduced by previous contributions, even where those contributions had not reduced the taxable base declared each year.
The Supreme Court concluded that Article 51.6 of the law only prohibits reducing the amount received on withdrawal by the “excess” of the participant’s contributions or the employer’s contributions. The provision’s silence on situations in which the participant could have reduced the taxable base when making the contributions but did not do so does not justify concluding that such a reduction cannot be made later, when the pension benefit is received.