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

The taxation of amounts received within the framework of a collective redundancy raises doubts about which part of the severance pay is exempt from Personal Income Tax (IRPF) and which part must be included in the worker's taxable base. The Dirección General de Tributos (DGT) has specified the limits applicable to these incomes and other benefits derived from the termination of the contract.

What the DGT has ruled

The binding body establishes that severance pay for collective redundancies enjoys a limited exemption. For a portion of the severance pay to remain untaxed, two simultaneous conditions must be met: it must not exceed the amount established by the Workers' Statute for unfair dismissal, and it must not exceed the limit of 180,000 euros. Any amount exceeding the lesser of these two values will be taxed as employment income.

Furthermore, the ruling clarifies the treatment of other concepts:

• Health insurance: Benefits from this insurance are exempt up to a maximum of 500 euros per person annually, or 1,500 euros in the case of disability. The excess is considered income in kind.
• Special agreement: Contributions borne by the employer are not taxable for the worker, but if these are assumed by the employee, they constitute full employment income.
• Pension plans and risk insurance: Contributions made are taxed as regular income.

What it means for you

If you are a worker facing a collective redundancy process, you must keep in mind that the exemption is not unlimited. It is essential to calculate whether your severance pay exceeds the 180,000 euro limit or the legal amount set by the Workers' Statute, as the surplus will increase your tax burden under IRPF.

For companies, this criterion implies the need to accurately apply the exemption limits for both severance pay and health insurance paid to staff, avoiding errors in withholdings and in the settlement of income in kind.

What should be done

It is necessary to verify the exact amount of the agreed severance pay against the legal limits to foresee the real tax impact. In the case of health insurance, it must be monitored that the annual cost does not exceed the established exemption thresholds to avoid unexpected taxation for income in kind. It is recommended to assess each particular situation to ensure compliance with current regulations.