30% reduction on early retirement compensation received as a lump sum

The Dirección General de Tributos (DGT) has issued a relevant ruling for workers who end their employment relationship through mutual agreement. The central issue was to determine whether the amounts received under this concept allow for the application of the tax reduction provided for income obtained in an irregular manner.

What the DGT has ruled

The body has ruled that the amounts paid by a company due to the termination of the employment relationship by mutual agreement are classified as employment income obtained in a notoriously irregular manner over time. Upon meeting this requirement, the administration confirms that it is possible to apply the 30% reduction established in Article 18.2 of the IRPF Law.

A key point of the ruling is the method of payment. The DGT establishes that, if said compensation is received as a lump sum, the requirement of imputation in a single tax period is satisfied. This allows the worker to access the tax benefit, provided that the annual limit of 300,000 euros established by the regulations is respected.

What this means for you

If you are in a process of early retirement or leaving the company through a mutual agreement, this ruling is fundamental for your tax planning. It means that receiving the compensation in a single payment does not prevent the use of the 30% reduction, which results in a direct decrease in the taxable base upon which you pay IRPF.

This benefit is applicable as long as the nature of the amount is compensation for the termination of the contract and the requirements of temporal irregularity required by law are met.

What you should do

In a situation of contract termination by mutual agreement, it is necessary to verify that the amount received fits within the provisions of the current regulations. It must be checked that the payment is made in a single tax year to ensure the application of the reduction, and the 300,000 euro limit must be kept in mind to avoid errors in the tax return. Given the complexity of these calculations, it is necessary to assess each particular situation to confirm compliance with all legal requirements.