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V2509-16 8 June 2016 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · indemnización por despido

Severance pay loses tax exemption if re-employed by the same company within three years, unless proven otherwise

A worker inquired whether their severance pay would retain its Personal Income Tax (IRPF) exemption after receiving a new proposal from their former employer. The Directorate General for Taxes (DGT) explains that returning to work for the same company, or an affiliated one, within three years creates a presumption that no real termination of the employment relationship occurred.

The question raised

Tax treatment under Personal Income Tax (IRPF) of severance pay in the event of providing services to the company that dismissed the worker. Existence of a real and effective severance of the worker's relationship with the company.

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 provides services again to the same company or to an affiliated company within the three years following the dismissal. This presumption admits evidence to the contrary, whereby the taxpayer may prove that the new relationship does not nullify the original severance.

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