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V2744-21 10 November 2021 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · indemnización por despido

Tax exemption for objective dismissal compensation is limited by the Workers' Statute and €180,000

The taxpayer asks whether compensation for dismissal due to objective grounds is tax-exempt without the need for conciliation. The DGT rules that the exemption applies up to the limit of compensation for unfair dismissal or €180,000, whichever is lower.

The question raised

Whether the severance pay to be paid to the taxpayer for dismissal on objective grounds is considered exempt from taxation without the need for a conciliation act before the Mediation, Arbitration, and Conciliation Service.

The DGT's ruling

Severance pay for objective grounds is exempt from Personal Income Tax (IRPF) subject to the lower of: the amount mandatorily established in the Workers' Statute for unfair dismissal (33 days per year of service with a maximum of 24 monthly payments for contracts entered into after February 2012) and the amount of 180,000 euros. The excess over these limits shall be taxed as employment income.

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