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V2601-15 8 September 2015 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · retención a cuenta

Payment of unfair dismissal indemnities: retention depends on tax exemption at payment date

A company asks whether IRPF retention applies to unfair dismissal payments made after the 26/2014 law reform. The tax authority replies that retention arises at the time of payment, and if the indemnity was exempt under the applicable rules at that time, no retention is due.

The question raised

Given the modifications introduced to the Personal Income Tax Law by Law 26/2014, the obligation of the applicant to apply withholding on the indemnities it has satisfied.

The DGT's ruling

The obligation to withhold arises at the moment the income is satisfied. If, upon payment of the severance indemnity, it was exempt from taxation according to the regulations in force at that time, the company is not obliged to apply withholding. The subsequent entry into force of Law 26/2014, which introduces a limit of 180,000 euros to the exemption, does not generate the obligation to withhold on payments already made.

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