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V2604-19 24 September 2019 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · indemnización por despido

Compensation for fundamental rights violations agreed at SMAC is not exempt from Income Tax

A taxpayer inquired about the tax treatment of compensation for unfair dismissal and other payments for fundamental rights violations agreed upon in a conciliation agreement. The Directorate General for Taxes (DGT) ruled that while unfair dismissal compensation may be exempt, compensation for fundamental rights violations is not, as it does not constitute a judicially recognised amount.

The question raised

Tax treatment of compensation received under Personal Income Tax.

The DGT's ruling

The exemption for dismissal applies if unfair dismissal is recognized in the conciliation act before the SMAC or by judicial resolution. However, compensation for civil liability for personal injury is only exempt if the amount is legally or judicially recognized. When the amount for violation of rights is established in a conciliation act before the SMAC, it is not considered judicially recognized, and therefore constitutes income subject to tax.

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