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A worker inquired whether an additional economic settlement agreed upon in a judicial settlement following dismissal was exempt from Income Tax. The Directorate General for Taxes (DGT) ruled that only the mandatory amount required by the Workers' Statute is exempt, whereas any excess amount is taxable.
This ruling clarifies that any voluntary or negotiated increase in redundancy pay beyond the statutory minimum is treated as taxable employment income rather than an exempt redundancy payment.
The tax team reviews your specific situation.
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