The Tax Agency has put the spotlight on unfair dismissals of workers close to retirement age. The tax authorities are monitoring these actions because of suspicions that they are hidden agreements between the parties whereby the company simulates an unfair dismissal and pays the employee a severance payment that allows him to hold out financially until he reaches retirement age and then connects him to his pension. At the same time, the employee does not claim his dismissal before the corresponding Mediation, Arbitration and Conciliation Centre.

Our employment experts point out that for the Tax Agency the difference between a dismissal and an agreement is key: while severance pay is exempt from personal income tax up to 180,000 euros, the amount that the company pays a worker for a mutually agreed termination must be taxed. The fine in these cases ranges from 50% of the amount not paid to the tax authorities to 150%, depending on the seriousness of the offence.

The tax authorities do not quite believe these dismissals and are opening massive inspections of both companies and taxpayers to certify that it is not an unfair dismissal, but an agreement that allows the ex-employee to keep the severance pay until retirement.

Global Consulting