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V0925-19 29 April 2019 · SG de Impuestos Patrimoniales, Tasas y Precios Públicos Criterion in force
IP · indemnización por despido

Severance pay is subject to Wealth Tax even if exempt from Income Tax

A query was raised regarding whether severance pay exempt from Personal Income Tax (IRPF) is also exempt from Wealth Tax. The Directorate General for Taxes (DGT) has ruled that it is not, as such compensation is not listed as exempt under wealth tax regulations.

The question raised

Whether the amount of severance pay exempt from Personal Income Tax is also exempt from Wealth Tax.

The DGT's ruling

Severance pay is subject to Wealth Tax provided that it forms part of the taxpayer's net wealth. Furthermore, it must be included in the calculation of the full tax liability limit, as the ownership of said amount is capable of generating income taxable under Personal Income Tax. The exemption under Personal Income Tax does not extend to income obtained from the subsequent use of the funds.

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