Exempt amount: Limits

Compensation for dismissal or termination of the employee, with the following limits:

• Up to the amount established as mandatory in the Workers' Statute, in its implementing regulations, and, where applicable, in the regulations governing the execution of sentences .

  However, it should be noted that Article 7.e) of the Income Tax Law establishes, as will be seen later, an exception in the case of collective dismissals for which a greater exemption is provided for than the amount of compensation established as mandatory in the Workers' Statute.

  However, in order to declare exempt compensation for unfair dismissal or termination up to the amount established as mandatory in the Workers' Statute, we must differentiate between dismissals that occurred up to July 7, 2012 and those that originate after that date:

  • In dismissals made up to July 7, 2012 severance pay is exempt when the employer so acknowledges at the time of notification of the dismissal or at any other time prior to the conciliation act, provided that the amount of the compensation does not exceed what would have corresponded in the case of the dismissal having been declared unfair, and it is not a question of terminations by mutual agreement within the framework of collective plans or systems of incentivized redundancies. (twenty-second transitional provision of the Personal Income Tax Law ).
  • In dismissals produced after July 7, 2012 , only compensation recognized in an act of conciliation or in a judicial resolution are exempt.

  Precision: On November 13, 2015, the consolidated text of the Workers' Statute Law, approved by Royal Legislative Decree 2/2015, of October 23 ( BOE of the 24th), came into force. All references to the Workers' Statute included in this Chapter must be understood as being made to the aforementioned consolidated text.

• However, the amount of exempt compensation will have a maximum limit of 180,000 euros . Therefore, although the total compensation does not exceed that stipulated in the Workers' Statute or in its implementing regulations, if it exceeds 180,000 euros, the excess will be subject to taxation, with the exceptions indicated below (twenty-second transitional provision.3 Law IRPF ).

  This limit of 180,000 euros will not apply:

  • To compensation for dismissals or terminations that occurred prior to August 1, 2014.

  • To compensation for dismissals that occur from that date when they derive from an approved employment regulation file, or a collective dismissal in which the opening of the consultation period had been communicated to the labor authority, prior to August 1, 2014 .

    Note: When the amount of compensation received exceeds the amount that, in each case, is mandatory or the maximum limit of 180,000 euros, the excess is not exempt from IRPF and must be declared as personal work income, without prejudice to the legally established reduction for work income generated over a period of more than two years that may be applicable, where appropriate.