Severance pay may qualify for the 30% reduction even if previously applied

The tax treatment of severance pay has raised doubts regarding the application of the 30% reduction when the taxpayer has already benefited from this incentive on other income with generation periods exceeding two years in recent years.

What the DGT has ruled

The Dirección General de Tributos (DGT) has clarified that the reduction provided for in Article 18.2 of the Law of IRPF is applicable to severance pay derived from the termination of the employment relationship, provided that the legal requirements are met. The criteria establish that this specific income should not be counted towards the limitation of the previous five tax periods.

Consequently, the fact that the 30% reduction was applied to other income with generation periods exceeding two years within the five-year period does not block the right to apply this same reduction to a severance payment.

What this means for you

If you are a worker receiving severance pay, you maintain the right to reduce the taxable base of said income by 30%, provided that the generation period exceeds two years. This DGT decision ensures that the limitation of the five tax periods does not restrictively affect severance pay, treating it differently from other income that may have used the same reduction previously.

What you should do

Upon receiving severance pay, it is necessary to verify that the requirements regarding the timing and nature of the income required by current regulations are met. Since the application of this reduction depends on the correct classification of the income and compliance with the generation periods, each situation must be analyzed to ensure that the tax return correctly reflects this tax benefit.