The Central Economic-Administrative Court (TEAC, the Treasury body that resolves taxpayer claims) has established that compensation for incentivized dismissals and voluntary early retirements are taxed in personal income tax if the worker takes advantage of them without there being a collective dismissal in progress. As the criterion obliges the Tax Agency, whoever claimed the refund of what was paid now has it much more difficult, although they can still go to the judges.
According to the resolution of October 27 (which can be consulted in full at this Treasury link), the exemption from article 7.e of the Personal Income Tax Law only covers the compensation for dismissal that the Workers’ Statute establishes as mandatory, “without the compensation established by virtue of an agreement, agreement or contract being considered as such”, being in that second group where the departure agreed with the company is cited.
The bank has been cutting staff like this for years, with voluntary redundancy agreements and early retirements to which whoever wants to sign up and without going through an employment regulation file (ERE, the procedure with which a collective dismissal is processed), as they explain to The Country several tax experts. This was what the employee whose case has reached the TEAC did, who signed up for the plan that his bank signed on December 1, 2020 and left the entity on March 31, 2021 by mutual agreement.
Three years later, in July 2024, he asked the Tax Agency to correct his 2021, 2022 and 2023 returns so as not to pay compensation. He was denied twice, in January and March 2025, so he complained to the Regional Economic-Administrative Court of the Valencian Community, which in September agreed with him with several Supreme Court rulings on Banca Cívica and Banco Mare Nostrum plans. It was then the Tax Agency that appealed, and it was up to the TEAC to decide which criterion was valid for everyone.
For the TEAC, without an open ERE, departure is voluntary
The TEAC amends the Valencian court’s plan because, as it explains, these sentences “cannot, without further ado, be separated from the factual situation” that they judged. In Banca Cívica’s plans, the exit offer coincided with a collective dismissal in process, and that was what forced employees to “choose between one measure or another”, in the words of the Supreme Court, and what made a resignation signed on paper by mutual agreement mandatory.
In the case of this employee, this was not the case, because his bank did not notify the unions that it was going to open a collective dismissal until August 30, 2021, five months after his departure. For the TEAC, furthermore, the existence of an ERE “is not a matter of subjective assessment”, since it requires regulated steps such as a representative commission or a period of consultation with workers.
The criterion binds the economic-administrative courts and the rest of the Tax Administration, according to article 242 of the General Tax Law. “If there is no collective dismissal, signing up for a pre-retirement plan is a voluntary decision by the worker and the compensation is taxable,” summarizes Aitor Fernández, tax expert at TaxDown, in statements to The Country.
Judges, on the other hand, are not obliged to follow it, and the worker can defend before them that his departure was not free. Even so, at TaxDown they believe that the chances of winning decrease if there was no ERE open at the time of the withdrawal.
The personal income tax bill can be multiplied by four without ERE
Those who leave without ERE do not always pay taxes on the entire compensation, since the Personal Income Tax Law allows a 30% reduction (up to 300,000 euros) on some income that is collected irregularly over time, and its regulations (which can be consulted at this link) include there the “amounts paid by the company to the workers for the mutual agreement resolution of the employment relationship” as long as they are declared in a single year. The reduction is not valid for what is collected “in the form of income”, and that is why the Supreme Court denied it in 2020 (then it was 40%) to a Banca Cívica early retiree who collected his compensation every month.
According to the calculations of TaxDowna worker with a salary of 40,000 euros per year and a compensation of 80,000 would pay around 7,200 euros in personal income tax in Madrid and 7,900 in Barcelona if he leaves with an ERE, since only his salary would be taxed. With an agreed leave outside of a collective dismissal, the bill would rise to 29,600 and 31,100 euros.
In this example, the compensation is completely tax-free because 80,000 euros is two years’ salary, the usual maximum for an unfair dismissal (33 days per year worked with a limit of 24 monthly payments, according to article 56 of the Workers’ Statute), as long as the worker’s seniority reaches that limit.
In the other two TaxDown examples, with a salary of 70,000 euros and 140,000 in compensation, the difference between the two routes reaches 42,000 euros in Madrid and 45,000 in Barcelona. In the case of a manager with 100,000 euros in salary and 300,000 in compensation, it is between 54,000 and 61,000, because article 7.e of the Personal Income Tax Law does not exempt more than 180,000 euros and the rest is taxed.
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What is striking is that the resolution does not change anything for the employee who originated it. The General Tax Law obliges to respect in these appeals “the particular legal situation derived from the appealed resolution”, so he will retain the exemption that the Valencian court recognized, the same one that the Treasury will now deny to those who left like him without an ERE in place.