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V0704-20 3 April 2020 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · reducción del 30%

30% tax reduction not applicable to post-contractual non-compete compensation

A worker inquired whether financial compensation for a post-contractual non-compete agreement could benefit from the 30% reduction under Article 18.2 of the LIRPF. The Directorate General for Taxes (DGT) ruled that it is not applicable because there is no generation period exceeding two years.

The question raised

It is inquired whether the 30 percent reduction of Article 18.2 of Law 35/2006 is applicable to the compensation.

The DGT's ruling

Compensation for non-compete agreements does not allow for the 30% reduction under Article 18.2 of the Personal Income Tax Law (LIRPF). It is not considered that a generation period exceeding two years exists, as the indemnity arises upon the termination of the employment relationship. Furthermore, the duration of such agreements cannot exceed two years according to labor regulations.

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