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V2502-17 5 October 2017 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · indemnización por despido

Dismissal compensation has a tax-exempt threshold and a maximum of 180,000 euros

A trade union asks about the tax treatment of various amounts in a possible collective dismissal. The DGT clarifies that dismissal compensation has exemption limits, while other items such as relocation allowances or pension plan contributions are treated as income from work.

The question raised

Tax treatment applicable to Personal Income Tax regarding severance pay, special Social Security agreement, and forced transfer allowance. Inclusion within the exempt maximum of the supplementary severance, the fourth installment of productivity improvement, and the additional contribution arising from the Pension Plan.

The DGT's ruling

Severance pay is exempt up to the mandatory limit established in the Workers' Statute, with a cap of 180,000 euros. In cases of business succession, the calculation of years of service includes the time worked at the previous company. The forced transfer allowance is taxed as employment income and may qualify for the 30% reduction if it is considered to have been obtained in a notoriously irregular manner. Company contributions to the special Social Security agreement for the worker are taxed as employment income if the obligation to contribute lies with the employee.

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