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V5384-16 20 December 2016 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · indemnización por despido

IRPF exemption on severance pay following contract termination due to substantial change in working conditions

A worker inquired whether severance pay received for terminating their contract following a salary modification was exempt from Income Tax (IRPF), even if agreed upon during a judicial conciliation act. The Directorate General for Taxes (DGT) ruled that the exemption applies provided the amount and circumstances comply with the provisions of the Workers' Statute.

The question raised

Tax treatment in Personal Income Tax of the aforementioned compensation. Exemption in IRPF. Application of the exemption in the event that the termination of the employment relationship and the recognition of the compensation occur in a conciliation act before the court.

The DGT's ruling

The compensation for the termination of the employment contract resulting from a substantial modification of working conditions, pursuant to Article 41.3 of the Workers' Statute, is exempt from taxation under Personal Income Tax (IRPF). This exemption is maintained even if the termination of the employment relationship and the payment of the compensation are recognized in a judicial conciliation act. The exemption applies to the amount and compensable situation established by mandatory regulations.

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