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V0759-14 19 March 2014 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · indemnización por despido

Exemption from redundancy pay tax may be maintained if actual termination of employment is proven despite multiple employment

A query was raised regarding whether redundancy pay remains exempt from Income Tax (IRPF) if the worker continues to work for a related company. The Directorate General for Taxes (DGT) indicates that maintaining a relationship with a related entity triggers a presumption that there has been no real termination of employment, although this presumption can be rebutted with evidence to the contrary.

The question raised

Tax treatment under Personal Income Tax (IRPF) of the severance payment, in the event of continuing to provide services to the other related company from which the worker was dismissed.

The DGT's ruling

The provision of services to a related company in the three years following dismissal creates a presumption that there was no real severance. However, this presumption is rebuttable. The worker may prove, through admissible means of evidence, that the severance was effective and that the new relationship with the related entity does not nullify it.

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