Spanish Income Tax Return 2020, to be submitted in 2021, and errors that cuase severance pay to tbe taxed: the severance pay is exempt from taxation, but for this to be the case, it is mandatory that the ex-employee be truly and effectively separated from the company, at least in the three years following the dismissal or termination. 

In addition, it is important to know that compensation for not agreeing to return to the position that is offered after a leave of absence is not exempt. 

Cases not exempt from taxation in the 2020 Income Tax Return 

On the other hand, the following situations are not exempt from taxation: 

• If evidences are detected that the dismissal has been agreed, no exemption applies even if there is an agreement before the Mediation, Arbitration and Conciliation Center (CMAC), 
• theamounts received by workers who take advantage of a voluntary leave employment plan, a situation that implies a termination of the employment contract by mutual agreement, 
• Disciplinary dismissals qualified aslawful.

Maximum exempt limit 

The maximum exempt limit in the spanish income tax return is € 180,000. Anything that exceeds this limit is taxed as personal work performance in the corresponding section, although a 30% reduction can be applied to the surplus that does not exceed € 300,000 provided that the number of years of service in the company does not exceed 2 years. 

Dismissals 

Compensation for unfair dismissals that do not exceed 33 days of salary per year of service ia exempt, with periods of less than 1 year being prorated by months, up to a maximum of 24 monthly payments. 

Therefore, contracts formalised before February 12, 2012, which correspond a severance payment of 45 days of salary per year until that date, after which it is reduced to 33 days of salary per year of service, will not be exempt in the part of compensation prior to said date. 

Additionally, the compensation received may not exceed 24 monthly salary payments, unless the contract is prior to February 12, 2012, in which case the compensation may not exceed 42 monthly payments. 

Severance pay for unfair dismissals that do not exceed 33 days of salary per year of service are exempt from taxation in the spanish Income Tax Return  (IRPF). Therefore, it will be necessary to pay attention to the date of formalization of the contract.

Termination of management contracts and its effect on Spanish Income Tax Return

If the senior management contract is terminated due to the employer’s withdrawal, the mandatory minimum compensation is 7 days’ salary for each year worked, up to a maximum of 6 monthly payments, said amount being exempt up to a maximum of € 180,000. 

Collective dismissal 

According to the date of formalization of the contract: 

• If it is prior to February 12, 2012, indismissalsfor economic, technical, organizational, production reasons or force majeure, up to 33 days of salary per year of service are exempt. 
• If it is after February 12, 2012, there is a limit of 20 days per year of service, prorating by months the periods less than 1 year, with a maximum of 12 monthly payments.

Voluntary terminations. How they are taxed on the Spanish Income Tax Return

Voluntary dismissals are not exempt from work income taxation in personal income tax return unless: 

• dueto substantial modifications in working conditions that undermine the dignity of the worker, 
• dueto non-payment or continued delays in the payment of the agreed salary, 
• dueto any other serious breach of the contractual obligations of the employer, except in cases of force majeure, 
• incases of refusal by the employer to reinstate the worker in his previous working conditions in cases of geographical mobility and substantial changes in working conditions. 

Compensations for less than 20 days’ salary per year worked, with a maximum of 9 monthly payments, in cases of substantial changes in working conditions and in cases of disagreement due to displacement that involve a change of residence, are exempt. 

If you have been in ERTE in 2020, you can find out here how it will affect your income statement in our post.

Unemployment benefit in a single payment modality 

If we have received a one-time payment benefit in 2020, and we unsubscribe from the new activity that we have undertaken or we cease to be part of the society or labor cooperative of which we were part, failing to comply with the mandatory maintenance period after the single payment, we will have to declare unemployment benefit. 

In following posts we will detail more news to take into account in your Income Tax Return to be made in 2021. One more year and as we already mentioned in our 2018 Income Tax Return post, we remind you of the importance of declaring income from holiday rentals in your statement. The Pérez Parras Economists and Lawyers Firm in Malaga and Nerja has a large team of top-level tax experts in matters of income tax return and taxation, also including the specialty of holiday rentals. 

Do not hesitate to count on Pérez Parras Economists and Lawyers Firm to prepare your income tax return statement.