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V2637-21 29 October 2021 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · rendimientos del trabajo

Compensation for termination of employment due to disability is not exempt from Personal Income Tax if agreed upon via collective bargaining agreement

A worker inquired whether the compensation received for the termination of her employment following total permanent disability was exempt or could be subject to a reduction. The DGT responds that it is not exempt income as it is a collective bargaining agreement provision and that the 30% reduction depends on the seniority of the agreement.

The question raised

Issue raised: Taxation of the compensation received. Temporal imputation. Application of the exemption and the reduction provided for in articles 7 e) and 18.2 of the Tax Law.

The DGT's ruling

Compensation for the termination of the employment relationship due to total permanent disability is not exempt income if the amount is stipulated exclusively in a collective bargaining agreement and not in the Workers' Statute. To apply the 30% reduction for a generation period exceeding two years, it is required that the worker has more than two years of seniority in the company and that the agreement or pact establishing the compensation also exceeds that period. In this case, the reduction shall apply provided that the collective bargaining agreement has a seniority of more than two years.

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