30% reduction for incentives with a generation period exceeding two years

The Dirección General de Tributos (DGT) has issued a relevant ruling regarding the application of the reduction provided for in Article 18.2 of the Personal Income Tax Law (LIRPF). The issue focuses on whether it is possible to apply this tax benefit to incentives whose generation period exceeds two years, even if the taxpayer has already used the reduction in previous years for other income classified as notoriously irregular.

What the DGT has ruled

The advisory body determines that the taxpayer can apply the 30% reduction to the incentive received, provided that it has a generation period exceeding two years. The key point of the resolution is the distinction between the types of irregular income. The limitation that prevents applying the reduction if it has been used in the previous five tax periods applies exclusively to income with a generation period exceeding two years. This restriction does not affect those types of income that are regulationally classified as notoriously irregular.

For the reduction to be valid, two fundamental requirements must be met:

• The income must be reported in a single tax period.
• The amount of the incentive must not exceed 300,000 euros per year.

What this means for you

This ruling has a direct impact on workers who receive incentives with prolonged generation periods or severance payments by mutual agreement. If you have previously used the 30% reduction for other income considered notoriously irregular, you are not prevented from applying it again for a long-term incentive, provided that the aforementioned legal limits are respected.

What you should do

It is necessary to analyze the technical nature of the incentive received and its generation period to determine if it fits into the category that allows this application. Since the regulations distinguish between notoriously irregular income and those with a generation period exceeding two years, the correct classification of the income is decisive for calculating the tax burden. It is recommended to assess each particular situation to ensure that the requirements for single-period reporting and the quantitative limits established in the LIRPF are met.