An early retirement should not cost tens of thousands of euros more because of when a redundancy procedure opens

A bank employee left his bank in 2021 under a plan of early retirements and incentivised departures. A few months later, the company formalised a collective redundancy procedure, known in Spain as an ERE. With those two facts in that order, the Central Economic-Administrative Tribunal (TEAC) has decided that what the worker received on leaving was not the compensation of someone who was dismissed, but the price of a voluntary agreement, and that all of it is subject to personal income tax (IRPF). The ruling, dated 27 October and issued to unify criteria, now binds the Tax Agency and the economic-administrative tribunals.

The difference is not small. According to calculations by the tax platform TaxDown, reported by Infobae, someone earning 40,000 euros a year who receives 80,000 euros in compensation would pay about 7,200 euros of income tax in Madrid if the departure is part of an ERE, and about 29,600 if it is not. With a salary of 70,000 and compensation of 140,000, the bill would rise from 17,800 to 60,000 euros. Tens of thousands of euros depend on a single thing: whether the company had already opened the procedure when the worker signed.

It must be acknowledged that the TEAC has invented nothing. The income tax law, in its article 7.e, exempts compensation for collective dismissal up to the limit for unfair dismissal, with a ceiling of 180,000 euros, and not compensation agreed by contract. The Directorate General for Taxation had already denied the exemption in rulings from 2021 and 2022 when no collective dismissal was on record, and the TEAC itself cites them. Nor is this a new law: it is an interpretation that settles a dispute.

But it is a dispute that should never have existed. The regional tribunal of the Valencian Community had sided with the worker in 2025, relying on the Supreme Court ruling of September 2020 on the early retirements at Banca Cívica, according to Press Digital. And the same Supreme Court, that year, had issued two judgments that reached different solutions for the same set of facts. When two bodies of the tax administration and two rulings of the same court do not agree, a taxpayer signing his departure in 2021 had no way of knowing how much it would cost him.

The best argument in favour of the criterion is serious and deserves to be stated in full. A tax exemption exists to protect those who lose their job against their will, not to cheapen the agreed exit of someone who negotiates well. If every incentivised departure were exempt, companies and workers would have an obvious incentive to dress up salary as compensation, and the biggest winners would be the highest earners. Requiring a formal procedure, with a negotiating committee, consultations and notification to the labour authority, as the TEAC does, at least provides a boundary that can be checked.

What does not convince me is where that boundary falls. The date on which an ERE is opened is decided by the company, not the worker. In a bank that has been cutting staff for years, the employee offered an exit before the procedure knows, just like the one who accepts it afterwards, that his job is up in the air. The difference between them lies not in their will but in the human resources calendar. That the tax authority treats two almost identical decisions so differently because of a formality neither of them controls is bad design, however good the interpretation may be.

There is also an irony that is hard to overlook. The TEAC has respected the particular situation of the worker who brought the case, who keeps what he won in Valencia. The criterion will apply to those who come after, including people who left in the same years and have claims pending. They can go to court, because judges are not bound by this ruling, but that means years of litigation to find out how much they owed for a decision they took five years ago.

The solution is not for the TEAC but for those who write the laws. Article 7.e should state clearly what happens with incentivised departures: whether they count as dismissals when the company has notified economic or organisational grounds to the labour authority, even if the ERE comes later, or whether they never count. Either answer can be defended; what cannot be defended is letting the answer arrive five years late. And, in the meantime, anyone offering an exit plan should be required to explain in writing, before the signature, how the money it promises will be taxed.

A tax system is judged not only by what it collects, but by whether someone signing a piece of paper can know what they will pay. Today, with an early retirement offer in hand, the honest answer is that it depends on a date that is not on the paper.