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V2732-23 6 October 2023 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · rendimientos del trabajo

30% tax reduction for employment income inapplicable if generation period is less than two years

An employee inquired whether a retention bonus, contingent on remaining with the company until March 2023, qualifies for the 30% reduction under Article 18.2 of the Personal Income Tax Act (LIRPF). The Directorate General for Taxes (DGT) ruled that it is not applicable because the generation period does not exceed two years.

The question raised

Whether the 30 percent reduction provided for in Article 18.2 of the Tax Law is applicable.

The DGT's ruling

The 30% reduction under Article 18.2 of the Personal Income Tax Law requires that the income has a generation period exceeding two years or is notably irregular. In this case, the bonus is not notably irregular income and its generation period does not exceed two years, as the right is recognized in December 2021 to be enforceable in March 2023. Therefore, the reduction is not applicable.

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