Collective redundancy severance payments will have an exemption limit of 180,000 euros

The taxation of amounts received by workers following a collective redundancy has been clarified by the Tax Administration. The tax treatment of these severance payments depends on the amount and the regulations applicable to the specific case.

What the DGT has ruled

The Directorate General of Taxes (DGT) establishes that the portion of the collective redundancy severance payment that is exempt from taxation is limited to the lesser of the following two amounts:

• The amount established in the Workers' Statute for unfair dismissal.
• The amount of 180,000 euros.

Any excess over these limits must be taxed as employment income under IRPF. However, the worker may apply the 30% reduction provided that the established legal requirements are met. Regarding other concepts, contributions to pension plans are taxed as regular income, while health insurance is exempt up to a limit of 500 euros annually per person, or 1,500 euros in the case of disability.

What it means for you

If you are a worker who is going to receive severance for collective redundancy, you must take into account that the entire amount may not be tax-free. It is necessary to calculate whether your severance exceeds the 180,000 euro limit or the provisions of the Workers' Statute to determine the taxable base of your IRPF.

Likewise, if the company makes contributions to special agreements, these are not taxed for the worker if they are borne by the employer. However, if these contributions are borne by the worker, the amounts paid by the company will be integrated as gross employment income.

What is advisable to do

It is necessary to verify the exact amount of the severance and compare it with the legal limits to foresee the tax impact on the income tax return. Companies must ensure the correct application of these exemption limits, both in severance payments and in health insurance paid to their employees, to avoid errors in withholdings.