Skip to main content
Practical Income Manual 2022.

4. Specific limits

4.1. For income derived from the termination of an employment relationship, common or special, or the commercial relationship with administrators and members of the Boards of Directors and other members of other representative bodies.

Without prejudice to the joint general annual limit of 300,000 euros, in cases of termination of the employment relationship, common or special, or the commercial relationship with administrators and members of the Boards of Directors, and other members of other representative bodies, or of both, produced after January 1, 2013 in which the amount of work income derived from the extinction exceeds 700,000 euros, the following additional limits are established for the application of the 30 percent reduction specific.

Note to the box:

(*) RT = arithmetic sum of such labor income from the same company, or from other companies in the group, regardless of the number of tax periods to which they are attributed. (Back)

Amount of irregular work incomeLimit on which to apply the 30 percent reduction
Up to 700,000 euros Joint general annual limit = 300,000 euros 
Between 700,000.01 and 1,000,000 euros 300,000 - (RT - 700,000) (*)
More than 1,000,000 euros 0 euros

For the application of these limits, the total amount of work income to be computed will be determined by the arithmetic sum of the work income indicated above from the company itself or from other companies in the group of companies in which the circumstances provided for in the article 42 of the Commercial Code, regardless of the number of tax periods to which are attributed.

Remember : These additional limits specific are not applicable to work income derived from the termination of labor or commercial relationships, produced prior to January 1, 2013 (twenty-fifth transitional provision of the Law of IRPF ).

Please also note that, in the case of income derived from the termination of an employment relationship, common or special, for the purposes of applying the additional specific limits, the amount of income to be computed will be the excess over the exempt limit.

Example:

Don RTL was fired on January 3, 2022. As a consequence of the above, he has received compensation of 550,000 euros from the company, of which 200,000 euros correspond to the amount established on a mandatory basis in the Workers' Statute for unfair dismissal. Calculate the applicable reduction.

Solution :

Amount received: 550,000

Amount exempt from tax: 180,000

The lesser of:

  1. Amount established as mandatory by the Workers' Statute: 200,000
  2. Maximum exempt compensation amount: 180,000

Full taxable income (550,000 – 180,000) = 370,000

Note: Compensatory excesses over the exempt limit (that is, 370,000 euros) are subject to taxation as income from work.

Applicable reduction (30% s/ 300,000) = 90,000

Note: Since the amount of the subject income is less than 700,000 euros, the reduction is applied with the general annual limit of 300,000 euros.

Income to be included in the tax base (370,000 – 90,000) = 280,000

4.2. For income derived from the exercise of purchase options on shares or participations by workers granted before January 1, 2015

In this case (income from work derived from all purchase options granted prior to January 1, 2015), without prejudice to the application of the joint annual limit (300,000 euros), the limit provided for in article 18.2 will apply. b) 1 of the Personal Income Tax Law in its wording in force on December 31, 2014 .

Said limit was that the amount of income to which the reduction was applied could not exceed the amount resulting from multiplying the average annual salary of all the filers in Personal Income Tax , which will be of 22,100 euros, for the number of years of generating the performance.

Regarding the average annual salary of the group of Personal Income Tax filers , see the sixteenth transitional provision of the Personal Income Tax Regulation.

This limit was doubled when said returns met the following requirements:

a. The shares or participations acquired will be held for at least three years, counting from the exercise of the purchase option.

b. The offer of purchase options will be made under the same conditions to all workers of the company, group or subgroups of the company.

In general plans for the delivery of purchase options on shares or participations, failure to comply with the requirement to maintain the shares or participations acquired, for at least three years, will motivate the obligation to present a complementary self-assessment, including the interests of delay, in the period between the date on which the requirement is breached and the end of the regulatory declaration period corresponding to the tax period in which said breach occurs (seventeenth transitional provision of the Personal Income Tax Regulation ).