Two figures that look the same and are not: the money you are owed for work already done (the finiquito, or final settlement) and the money you are given for losing your job (severance, indemnización). For income tax (IRPF, the Spanish personal income tax) they are not treated alike. This page explains the difference, what to look at on the receipt and what I cannot give you here: withholding bands and percentages, which depend on your situation and on rules this site does not cover.
The finiquito is salary and is treated like a payslip
The finiquito collects what you have already earned: days worked in the last month, the share of extra payments and untaken holiday. These are pay for work, and the company puts them on a receipt with earnings and deductions, just like any payslip. That is why the calculation in how to calculate your finiquito always gives a gross figure: withholding and the worker’s contributions are applied to it.
Article 29.1 of the Estatuto de los Trabajadores (Workers Statute) asks for the salary receipt to show the different earnings and the legal deductions clearly and separately. Applied to the finiquito, it means you should be able to see each item and each deduction on its own.
Statutory dismissal severance is exempt, with a cap
The guide to calculating severance for unfair dismissal records that article 7.e of the personal income tax law exempts dismissal severance up to the amount the Statute sets as compulsory, with a cap of €180,000. An amount fixed by a collective agreement, private deal or contract is not treated as compulsory, except what is agreed at the conciliation hearing before the administrative service.
The text of the income tax law has not been checked for this page: take the exemption as the linked guide records it, and confirm it with the tax agency (Agencia Tributaria) or a gestor (administrative adviser) if the amount is significant.
The compulsory amount for each type of dismissal comes from the Statute:
| Type of dismissal | Statutory severance | Article |
|---|---|---|
| Unfair (improcedente) | 33 days’ pay per year of service, maximum 24 months | 56.1 |
| Objective (objetivo) | 20 days per year, maximum 12 months | 53.1 |
| Disciplinary, upheld | None | 55.7 |
What falls outside that sum, such as the end of a temporary contract or an exit deal with a higher figure, may be taxed differently. If your payment is not a dismissal severance, ask before assuming the exemption applies.
An example: unfair dismissal with both items
Lucía earns €24,000 gross a year and joined the company exactly four years ago. She is dismissed, the dismissal is declared unfair and the company chooses to pay severance. Her finiquito is €1,800 gross (days of the month, extra pay and holiday, worked out as in the final settlement calculator).
- Daily salary: 24,000 / 365 = €65.75.
- Severance: 33 days × 4 years = 132 days × €65.75 = €8,679.45.
- Total she receives: 1,800 + 8,679.45 = €10,479.45.
| Item | Amount | Nature | Treatment on the receipt |
|---|---|---|---|
| Finiquito (earned salary) | €1,800.00 | Salary | Withholding and contributions, like a payslip |
| Statutory severance | €8,679.45 | Compulsory amount, art. 56.1 | Exempt according to the guide, being below €180,000 |
| Total | €10,479.45 |
In this example, withholding should apply only to the €1,800. If your receipt shows a single line of €10,479.45 with withholding on the whole sum, ask why.
The same example with two other types of dismissal
Lucía’s finiquito (€1,800) would be the same in any dismissal; what changes is the severance. With 4 years of service and a daily salary of €65.75:
| Dismissal | Calculation | Severance | Total with finiquito |
|---|---|---|---|
| Unfair | 33 days × 4 years = 132 days × €65.75 | €8,679.45 | €10,479.45 |
| Objective | 20 days × 4 years = 80 days × €65.75 | €5,260.27 | €7,060.27 |
| Disciplinary, upheld | No severance (art. 55.7) | €0 | €1,800.00 |
In all three cases, the only part withheld as salary is the €1,800 finiquito. What changes is how much of the total is severance and therefore outside that withholding, according to the linked guide.
If the company pays more than the statutory amount
Suppose the company, to close the matter, offers €12,000 instead of €8,679.45. The part paid above the compulsory amount is 12,000 − 8,679.45 = €3,320.55. That difference does not necessarily get the same treatment, except what is agreed at the conciliation hearing, as explained above.
It can also affect a benefit. For the unemployment subsidy, article 275.5.b of the General Social Security Act leaves the statutory severance provided by the Statute out of countable income, but says any agreed excess is counted as income. That €3,320.55 excess would count as income when checking the income test. The subsidy is covered in unemployment subsidy: requirements and duration.
What to check on the receipt
- That the items are separate. Current month, extra payments, holiday and severance, each with its amount.
- That severance does not carry the same withholding as salary without an explanation.
- That deductions have names. Income tax withholding and the worker’s contribution are different lines.
- That you sign what you understand. If it does not add up, sign “not in agreement”.
Article 49.2 of the Statute obliges the company to attach a proposed settlement when it notifies the end of the contract. Use it to compare figures before you sign.
Why your case may be different
- Withholding on your finiquito depends on your personal situation, not on one table for everyone. This site does not calculate it.
- The final adjustment is made in your tax return. What is withheld on the finiquito is part of the annual calculation, not its end. A gestor or the tax agency can tell you whether too much or too little was withheld.
- Objective dismissal or a deal at conciliation have different amounts: see objective dismissal severance and the settlement on dismissal.
- If the dismissal is declared void or back pay (salarios de tramitación) is due, those sums are a separate item with their own treatment.
This page is general information and not tax advice. If deadlines or money are at stake, speak to an employment lawyer (abogado laboralista) or a union, and to a gestor for the tax side.