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Practical Income Manual 2022.

1. Income with a generation period of more than two years, other than those derived from social security systems: reduction of 30 percent

In general

A reduction of 30 per 100 of the amount of full returns will be applied when each and every one of the following requirements are met:

  • That the returns have a generation period greater than two years.

    The performance generation period must be understood as the time elapsed from the beginning of the existence of the right to receive the performance until it materializes, producing the accrual of the performance. The generation period understood in this way must be greater than two years, computed from date to date.

  • That the income is allocated in a single tax period.

  • That within the term of the five tax periods preceding the one in which they are payable, the taxpayer would not have obtained other income with a generation period of more than two years, to which the tax would have been applied. reduction.

In particular: income derived from the termination of an employment relationship, common or special

In the case of compensation derived from the termination of an employment relationship, common or special, they will be taken into account to apply the reduction of 30 per 100 , the following particularities:

  • The generation period will be considered the number of years of service of the worker.

  • These returns can also be collected in fractions.

    However, in the event that they are collected in fractions, the 30 percent reduction will only be applicable when the quotient resulting from dividing the number of years of generation, computed from date to date, by the number of tax periods of fractionation , is greater than two.

    For these purposes, all those in which the compensation is received must be taken into account as tax periods of division, including the years in which the compensation is exempt.

    Taxpayer can apply the reduction, even if within the five previous tax periods he had obtained other income with a generation period of more than two years, to which he would have applied the reduction provided for in this pulled apart.

Transitory rules: 

Regulations: Transitional provision twenty-fifth Law IRPF

  • For income that was received in installments prior to January 1, 2015 and does NOT come from compensation for termination of the employment relationship, common or special, or the commercial relationship. 

    1. These must be income other than those coming from compensation for termination of the employment relationship, common or special, or the commercial relationship referred to in article 17.2 e) of Law ( administrators and members of the Boards of Directors, of the Boards that act in their place and other members of other representative bodies).

    2. These must be returns that were received in installments prior to January 1, 2015 .

    3. These must be income entitled to the application of the reduction of article 18.2 of the Personal Income Tax Law , in its wording in force on December 31, 2014.

    When these conditions are met, the taxpayer may apply the current reduction of 30 per 100 , to each of the fractions that are imputed as of January 1, 2015, provided that the resulting quotient of dividing the number of years of generation, computed from date to date, by the number of tax periods of fractionation, is greater than two.

    However, in the case of income derived from commitments acquired prior to January 1, 2015 that were scheduled to begin receiving it in installments in tax periods beginning on or after On said date, the replacement of the initially agreed form of collection with its collection in a single tax period will not alter the beginning of the yield generation period.

  • For income that is received in fractions and derived from the termination prior to August 1, 2014 of the commercial relationship with administrators and members of the Boards of Directors, and other members of other representative bodies.

    In the case of work income from compensation for termination of the commercial relationship with administrators and members of the Boards of Directors and other members of other representative bodies with a generation period of more than two years, the reduction of the 30 per 100 when the quotient resulting from dividing the number of years of generation, computed from date to date, by the number of tax periods of fractionation, is greater than two, as long as the date of the termination of the relationship is prior to August 1, 2014 .

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

    In the case of employment income derived from the exercise of purchase options on shares or participations by workers that were granted prior to January 1, 2015 and are exercised after more than two years since their concession, if, in addition, they were not granted annually, this reduction of 30 per 100 may be applied, even if within the period of the five tax periods prior to that in in which they are exercised, the taxpayer would have obtained other income with a generation period greater than two years to which the reduction would have been applied.