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V1523-19 24 June 2019 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · indemnización por despido

30% reduction for redundancy payments applicable if ratio of years of service to payment periods exceeds two

A taxpayer queried whether the 30% reduction for irregular income could apply to a redundancy payment received across two different tax years. The Directorate General for Taxes (DGT) ruled that the reduction is applicable if the ratio between the years of service and the number of tax periods in which the redundancy payment is received is greater than two.

The question raised

A consultation is made regarding the application of the reduction provided for in Article 18.2 of the Personal Income Tax Law to the severance pay paid.

The DGT's ruling

The 30% reduction provided in Article 18.2 of the Personal Income Tax Law is applicable to the amount by which the severance pay exceeds the exempt limit when the generation period is greater than two years. If the severance pay is received in installments, the reduction shall only be applicable if the quotient between the number of years of generation and the number of tax periods of installment is greater than two. All fiscal years in which the severance pay is received must be included in this calculation, including those fiscal years in which the exempt portion has been received.

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