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V3300-20 6 November 2020 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · indemnización por despido

Exemption from redundancy pay may be lost if the employee is rehired within three years

A company has enquired whether rehiring employees previously dismissed via a temporary work pool would affect their exemption from redundancy pay. The Directorate-General for Traffic (DGT) indicates that new hiring within three years creates a presumption that no real termination of the employment relationship occurred.

The question raised

Application of the exemption to severance pay, provided for in Article 7 e) of the Personal Income Tax Law, in the event of hiring an employee previously dismissed within a short period of time.

The DGT's ruling

The exemption of severance pay requires a real and effective severance of the worker's relationship with the company. It is presumed that such severance does not exist if the worker resumes providing services to the same company or an affiliated company within three years following the dismissal. This presumption allows for rebuttal to prove that the new relationship does not nullify the original severance.

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