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Non-competition settlement lacks tax benefits

| News | Employment Law and Social Security

Alfredo Aspra analyzes the refusal of the General Directorate of Taxes (DGT) that the compensations have the 30% bonus in Income Tax

The General Directorate of Taxes (DGT) rejects that the compensation paid in the event of dismissal due to a non-competition agreement enjoys the 30 percent bonus on income tax that the rest of the settlement has. "When a worker is dismissed with whom a post-contractual non-competition agreement was signed for 24 months, and the company pays compensation, the reduction provided for in article 18.2 of Law 35/2006 does not apply to this compensation", states the DGT in a binding consultation, dated October 8, 2019.

Alfredo Aspra, Partner of Andersen Tax & Legal's Employment Area, highlights that the compensation is a work performance and as a general rule, these are counted in their totality, being one of the exceptions to which the 30 percent reduction of the yields that have a generation period longer than two years and those obtained in a notoriously irregular way in time would be applicable, provided that they are imputed in a single tax period.

You can read the full article in El Economista.

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