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V2486-14 23 September 2014 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · indemnización por despido

Exemption from redundancy pay presumed lost if employee is rehired within three years

A company sought clarification on whether an exemption from redundancy pay remains valid after rehiring a worker shortly after their dismissal. The Directorate-General for Taxes (DGT) ruled that rehiring within less than three years creates a presumption that there was no real and effective termination of the employment relationship.

The question raised

Tax treatment for personal income tax purposes regarding severance pay in the scenario presented. Withholdings on account of personal income tax.

The DGT's ruling

The exemption of severance pay requires a real and effective severance of the worker's relationship with the company. It is presumed that no such severance exists if the worker resumes providing services to the same company or an affiliated company within three years following the dismissal. If effective severance is not proven, the worker must include the severance pay in their personal income tax return. Regarding withholdings, it is not appropriate to withhold tax on the severance pay at the time of payment, unless it is already determined at that moment that no severance occurred.

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