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V2034-21 ·7 July 2021 ·consulta-vinculante Medium impact
Tax

Mutual agreement compensation taxed as employment income; no reduction for irregularity if paid in instalments

A worker inquired whether compensation for a mutual termination agreement is taxed as employment income and if they could apply the reduction for irregularity or deduct future social security contributions as a self-employed person. The Directorate General for Taxes (DGT) ruled that it must be taxed as employment income, the 30% reduction cannot be applied if paid over several years, and self-employed social security contributions are not deductible from such compensation.

In 6 key points

How it affects those involved

This ruling clarifies that lump-sum severance payments received in instalments do not qualify for the tax reduction intended for irregular income, and prevents the offsetting of future self-employed social security costs against this specific type of compensation.

Lifecycle

2021-07-07PublishedPublished in the BOE
Official text Based on BOE data (boe.es). Information, not advice.

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This analysis is informational only and does not constitute legal advice or create a client-adviser relationship. BM Consulting.
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