On the withdrawal as a cause of termination of the senior management employment relationship. About their new tax treatment

The Spanish Tax Agency, in its fixation of treating us as modern serfs, vassals of the 21st century, has encountered a new disgust after the fall of one of its traditional bastions; the one established in the doctrine of the Administrative Litigation Chamber of the Supreme Court, according to which the compensation paid to a senior manager, due to the termination of his contract due to the employer's withdrawal, was irremissibly subject to the Income Tax of the Physical persons.

On the 5^th of November 2019, the Administrative Litigation Chamber, dismissing the appeal filed by the State Advocacy, has confirmed the ruling of the National Court according to which the compensation that the rule provides for the extinction by withdrawal of the senior management contract does enjoy the exemption of the tax of the Personal Income Tax (IRPF) according to article 7 of the law of this tax.

The National Court reached that conclusion based on the content of the ruling of the 22^nd of April 2014, of the Social Chamber of the Supreme Court that concludes the mandatory and unavailable nature of the compensation that, in cases of withdrawal, establishes the article 11 of the norm that regulates the special labour relationship of senior management personnel (RD 1382/1985) quantified in seven days of salary per year of service, with a maximum of six monthly payments.

In the appeal that the State's lawyer filed against the judgment of the National Court, it is affirmed, contrary to what was said by the aforementioned ruling of the Fourth Chamber of the Supreme Court, that the senior manager is not entitled to receive any mandatory minimum compensation when their contract is terminated by the employer's withdrawal and that, therefore, the compensation paid to you, whatever its amount, is taxed by the IRPF.

The National Court and the Supreme Court understand that if compensation, in the case of withdrawal is mandatory, the only valid conclusion must be the logical exemption provided in Article 7.e of the IRPF.

Another thing is the amount of compensation that is paid above the result of the equation marked by Article 11 of the R.D. 1382/1985 which is subject to IRPF.

In case the reader does not know, the withdrawal of the employer is one of the causes of termination of the employment relationship, based on the loss of confidence in the employee, which our legal system reserves, to date, for special relationships such as senior management and family home service. 

I say to date because, by way of a reminder and by paraphrasing myself, this figure can extend its scope to ordinary labour relations if the fledgling Government in its progress gives the culmination of the proposal that the head of the then called Ministry of Labour and Immigration of the last government of Zapatero, Mr. Valeriano Gómez Sánchez, made through Royal Decree 1620/2011, of the 14^th of November, regulator of the special employment relationship of the family home service.

In the second additional provision, first question, of that Royal Decree, it was proposed to study the inclusion of the withdrawal of the employer, understood as loss of confidence in the employee, as one of the common causes of termination of the employment contract established in article 49 of the ET (Statute of Workers Rights)..

I remember this for those who by historical amnesia overlook the gifts that make us what has been called progressive governments. I guess the unions will have something to say. I do not know. Maybe not.