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V0698-20 3 April 2020 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · indemnización por despido

Redundancy compensation is exempt up to the unfair dismissal limit or €180,000

The tax treatment of a €7,000 redundancy payment due to objective dismissal is examined. The DGT clarifies that the exemption applies up to the legal limit for unfair dismissal or €180,000, whichever is lower.

The question raised

Inquiry is made regarding the tax treatment of the dismissal compensation paid. Application of the exemption regulated in Article 7 e) and the reduction provided for in Article 18.2 of Law 35/2006 on Personal Income Tax.

The DGT's ruling

The compensation for objective dismissal is exempt up to the amount mandatorily established in the Workers' Statute for unfair dismissal, with a maximum limit of 180,000 euros. The excess over these limits shall be taxed as income from employment. For the 30% reduction due to irregularity, it must be met that the generation period exceeds two years or that they are classified as notoriously irregular.

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