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The consultant asks how to apply the 30% reduction under article 18.2 of the IRPF law to a dismissal indemnity and a non-competition compensation. The DGT responds that the reduction for dismissal depends on legal limits and fractionation, but does not apply to non-competition agreements as there is no generation period exceeding two years.
Question raised: Application of the reduction provided in paragraph 2 of Article 18 of the Personal Income Tax Law to both severance pay and compensation for a non-compete agreement, specifically, how the prescribed limit of 300,000 euros must be calculated.
Regarding severance pay, the 30% reduction applies to the amount exceeding the exempt limit if the generation period exceeds two years and the requirements for installment payments are met. In the case of a post-contractual non-compete agreement, there is no generation period exceeding two years, as the compensation arises with the dismissal itself. Therefore, the reduction provided in Article 18.2 of the Personal Income Tax Law is not applicable to said compensation.
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