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V2054-20 23 June 2020 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · indemnización por despido

Statutory severance pay exempt up to Workers' Statute or €180,000 limit

The consultant asks about the tax treatment of severance pay received in instalments and the possibility of correcting tax declarations. The DGT clarifies the exemption limits and conditions for applying a 30% reduction on taxable amounts exceeding the exemption.

The question raised

Tax treatment, under Personal Income Tax (IRPF), of the compensation for termination of the employment relationship. Application of the provisions of Articles 7 e) and 18.2 of the Tax Law. In the event that said provisions are applicable, the possibility of rectifying the self-assessments corresponding to the 2016, 2017, and 2018 tax years.

The DGT's ruling

The portion of the collective redundancy compensation that is exempt is that which does not exceed the limit set by the Workers' Statute for unfair dismissal and, in any case, 180,000 euros. The excess is taxed as employment income and may be eligible for the 30% reduction if the ratio between the generation period and the installment periods is greater than two. To rectify self-assessments that prejudice legitimate interests, a rectification may be requested provided that no final assessment has been issued for the same reason and four years have not elapsed.

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