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V0829-14 26 March 2014 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · reducción del 40%

40% tax reduction applicable to retirement bonuses exceeding two years of service

A query was raised regarding whether the retirement bonus provided by the Regional Government of Andalusia qualifies for the 40% Income Tax (IRPF) reduction. The Directorate General for Taxes (DGT) has ruled that it is applicable, provided two specific conditions regarding the generation period are met.

The question raised

It is asked whether the reduction provided in article 18.2.a) of Law 35/2006 is applicable to the retirement award paid by the Regional Government of Andalusia.

The DGT's ruling

To apply the 40% reduction on employment income with a generation period exceeding two years, it is required that the income be linked to a period of service in the company of at least that duration and that the agreement establishing it also exceeds two years. In this case, the reduction is applicable if the quantification of the award is carried out taking into account a period of time exceeding two years of service and is not obtained in a periodic or recurring manner.

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