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V2883-14 28 October 2014 · SG de Impuestos sobre las Personas Jurídicas Criterion in force
IS · indemnizaciones

Severance payments for redundancy plans are deductible in the year the plan is approved and termination is irrevocable

A company has requested clarification on whether severance payments resulting from a redundancy plan (ERE) are deductible in the year they are recorded or in the following one. The Directorate General for Taxes (DGT) has ruled that deductibility depends on when the plan is approved and the termination of contracts becomes irrevocable.

The question raised

Whether the entry recorded in the 2013 financial year for severance payments related to the redundancy plan is characterized as a tax-deductible expense for the 2013 financial year, or whether, on the contrary, said entry is not characterized as a tax-deductible expense for the 2013 financial year and is instead tax-deductible in the subsequent financial year.

The DGT's ruling

Pursuant to Articles 10.3 and 19.1 of the TRLIS, expenses are imputed in the period in which they accrue. The expense for severance payments shall be deductible in the financial year in which the redundancy plan has been approved by the competent Administration and the termination of the employment contracts is irrevocable.

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