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V2639-22 27 December 2022 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · rendimientos del trabajo

Compensation for termination of employment by mutual agreement is taxed as employment income

The taxpayer inquires about the tax treatment of compensation received following the mutual termination of their employment contract. The DGT rules that it must be taxed as employment income and that a reduction for irregularity may apply if it is reported in a single tax period.

The question raised

Treatment in the IRPF of the compensation received for the termination of the employment relationship. Obligation to perform withholding tax for the IRPF.

The DGT's ruling

The compensation for the mutual termination of the employment relationship has the nature of income from employment. As it is not a dismissal, the exemption provided in Article 7 e) of the LIRPF does not apply. However, it is considered income obtained in a notoriously irregular manner over time, therefore the 30% reduction provided for in Article 18.2 of the LIRPF may be applied provided that it is imputed to a single tax period.

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