Collective redundancy severance pay will be taxed on amounts exceeding 180,000 euros

The tax treatment of amounts received following a collective redundancy raises doubts about which part of the severance pay remains tax-free and which concepts must be included in the IRPF taxable base. A recent resolution from the Dirección General de Tributos (DGT) delimits the exemption margins and the treatment of supplementary benefits.

What the DGT has ruled

The tax authority establishes that severance pay derived from a collective redundancy enjoys a limited exemption. This exemption applies up to the lesser of two values: the amount established in the Workers' Statute for unfair dismissal and the limit of 180,000 euros. Any amount exceeding both thresholds must be taxed in full as employment income in the IRPF.

Regarding other concepts derived from the redundancy agreement, the DGT clarifies the following points:

• Special agreements: Contributions to the special agreement assumed by the employer are not taxed for the worker. However, if the obligation to pay falls on the worker and the company covers said cost, the amount paid by the company is considered full employment income.
• Pension plans and risk insurance: Contributions made to these concepts are taxed as regular income.
• Health insurance: This benefit has an exemption of up to 500 euros per year per person, which increases to 1,500 euros in the event of a disability.

What it means for you

If you are a worker affected by a collective redundancy, you should keep in mind that not all the amount received is tax-free. It is essential to distinguish between the legal severance pay and other concepts such as contributions to pension plans or insurance, which have a different tax treatment and usually tax as ordinary income.

For companies, this criterion implies the need to correctly apply the exemption limits in settlements and to precisely manage benefits in kind and contributions to special agreements to avoid errors in the IRPF withholding of their employees.

What should be done

It is necessary to analyze the details of the settlement and the redundancy agreement to identify which concepts are subject to taxation and which enjoy an exemption. Since the calculation depends on the comparison between the regulations of the Workers' Statute and the 180,000 euro limit, it is recommended to assess each particular case to determine the real impact on the income tax return.