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V2913-14 30 October 2014 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · premio de vinculación

40% tax reduction applicable to severance bonuses if generation period exceeds two years

A worker retiring after 35 years of service inquired whether the severance bonus received upon termination qualifies for the 40% Personal Income Tax (IRPF) reduction. The Directorate General for Taxes (DGT) ruled that this is possible provided it is proven that both the length of service with the company and the collective agreement regulating the bonus have a generation period exceeding two years.

The question raised

It is asked whether the reduction provided in article 18.2.a) of Law 35/2006 is applicable to the aforementioned bonus.

The DGT's ruling

To apply the 40% reduction for a generation period exceeding two years, it is required that the yield be linked to a period of seniority in the company of at least said period and that the agreement or pact establishing it also exceeds two years. In this case, the reduction would be applicable if the current agreement replaces a previous one that already included the same regulation of the retention bonus.

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