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V3183-23 11 December 2023 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · indemnización por despido

30% reduction applicable when calculating retention on excess severance pay

A company asks whether the reduction under article 18.2 of the LIRPF should be deducted when calculating the retention on a severance payment exceeding exemption thresholds. The DGT responds that to determine the retention type, the entity must reduce the amount of taxable income subject to the reduction.

The question raised

Whether, for the purpose of determining the applicable withholding rate, the company must reduce the amount of employment income paid by the amount of the reduction provided for in Article 18.2 of the LIRPF.

The DGT's ruling

The portion of the severance pay that exceeds the exempt limits is classified as employment income. To determine the withholding rate, the employer must reduce the total amount of taxable and non-exempt remuneration by the reductions applicable to gross income with a generation period exceeding two years. In the case of severance payments, the reduction provided in Article 18.2 of the LIRPF is applicable regardless of whether it was applied in the previous five tax periods.

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