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A query was raised regarding whether severance pay for the termination of a project-based contract is exempt if the worker returns to the company within three years. The Directorate General for Tax (DGT) ruled that such compensation does not qualify for the tax exemption.
This ruling clarifies that re-employment within a three-year period does not trigger the tax exemption for severance pay related to project-based contracts, meaning such payments remain subject to Personal Income Tax (IRPF).
The tax team reviews your specific situation.
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