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V1745-23 15 June 2023 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · indemnización por despido

Statutory severance pay has a tax-free threshold and 30% reduction if conditions met

The tax treatment of severance pay received in instalments is queried. The DGT clarifies the exemption limits and conditions for applying a 30% reduction on the non-exempt amount.

The question raised

Tax treatment, under Personal Income Tax (IRPF), of the compensation for termination of the employment relationship within the scope of a collective dismissal. Application criteria for the exempt amount if the compensation is received in installments over 83 payments.

The DGT's ruling

The exempt portion of the collective dismissal compensation is limited to the lesser of the mandatory amount established by the Workers' Statute for unfair dismissal or 180,000 euros. The excess is considered earned income and may be eligible for the 30% reduction if the ratio between the years of generation and the tax periods of installment payments is greater than two. For the calculation of installments, all fiscal years in which the compensation is received are included, including the exempt portions.

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