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V0715-19 29 March 2019 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · reducción por irregularidad

30% tax reduction inapplicable if severance pay is received over multiple years

A worker inquired whether the tax reduction for irregular income could be applied to a severance payment made by mutual agreement in five instalments. The Directorate General of Taxes (DGT) ruled that since the amount is not attributed to a single tax period, the reduction does not apply.

The question raised

Application of the reduction provided for in Article 18.2 of the Personal Income Tax Law to the severance pay for termination of the employment relationship received by the applicant.

The DGT's ruling

The 30% reduction for income obtained in a notoriously irregular manner over time requires that such income be imputed to a single tax period. Although amounts from settlements by mutual agreement are considered irregular income, the reduction is not applicable if the payment is distributed across several fiscal years.

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