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V1414-24 13 June 2024 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · rendimientos del trabajo

30% tax reduction may apply to severance payments from mutual termination of employment

The Directorate General for Taxes (DGT) has addressed whether the 30% reduction provided for in Article 18.2 of the Personal Income Tax Act (LIRPF) applies to amounts received following the mutual termination of an employment relationship. The DGT has ruled that it is applicable, provided that the amounts are attributed to a single tax period.

The question raised

Whether the 30 percent reduction provided for in Article 18.2 of the LIRPF is applicable to the compensation received due to the termination of the employment relationship by mutual agreement.

The DGT's ruling

The amounts paid by the company due to the termination of the employment relationship by mutual agreement are considered employment income obtained in a notoriously irregular manner over time. Therefore, the 30% reduction provided in Article 18.2 of the LIRPF is applicable if they are imputed to a single tax period. This reduction does not apply to compensation for non-compete agreements or special social security contribution quotas.

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