The 30% reduction on severance pay by mutual agreement requires a single payment

The Directorate General of Taxes (DGT) has issued a relevant ruling regarding the tax treatment of severance pay received through the termination of the employment relationship by mutual agreement. The core of the issue lies in determining whether it is possible to apply the reduction provided for income obtained irregularly when the collection is not made in a single payment.

What the DGT has ruled

The query concerned the possibility of applying the 30% reduction provided for in Article 18.2 of the Personal Income Tax Law (LIRPF) in cases of severance pay by mutual agreement. The DGT has ruled that these amounts constitute employment income.

However, for the 30% reduction established in the regulations to proceed, it is an indispensable requirement that said income be imputed to a single tax period. As the amounts are received in installments, the condition of single imputation necessary to access the tax benefit for irregularity over time is not met.

What this means for you

If you are a worker who has ended their employment relationship through a mutual agreement, you must take into account how the severance payment is structured. If the agreement stipulates that the amount is paid in different tax years or through partial payments within the same year that are not computed as a single unit of perception, you will lose the right to the 30% reduction.

This ruling limits the application of the LIRPF and the Regulation of the Personal Income Tax Law (RIRPF), as the administration requires full perception at a single moment to recognize the nature of irregular income that justifies the reduction.

What you should do

When negotiating a labor exit, it is fundamental to analyze the structure of the payments. It is necessary to assess whether the chosen collection model will impact the final tax burden. It is recommended to analyze the convenience of receiving the severance in a single payment versus a fractional payment scheme, always considering the particularities of each contractual situation and current regulations.