How bonuses, severance and one-off payments are taxed in Spain

Key rules

• Bonus: A bonus is ordinary pay taxed at progressive rates, with withholding that is only a provisional payment.
• Severance limit: Severance is tax-free only up to the legal minimum, capped at EUR 180,000 for dismissals since 2025.
• Agreed exit: A negotiated exit that is not a genuine dismissal gets no tax exemption.
• 30% reduction: Irregular or multi-year income may get a 30% reduction, but not if you used it for similar income in the previous five years.

The short version

Bonuses are taxed as ordinary pay. Severance is tax-free only up to a legal limit. Some irregular income can get a 30% reduction. The details below help you estimate your own case.

How a bonus is taxed

A bonus is ordinary employment income. It is added to the rest of your pay and taxed at progressive rates, so the more you earn in the year, the higher the rate on the top slice.

Your employer withholds tax in advance. The withholding percentage is recalculated when the bonus is paid, based on your expected total pay for the year. That is why the percentage on a bonus month can look higher than usual.

Withholding is only a provisional payment. The final tax is settled in your annual income tax return (the IRPF return), where you either pay the difference or get a refund.

A bonus earned over more than two years may qualify for the 30% reduction described below. It does not apply automatically. The conditions must be met.

How severance is taxed

Only the part of dismissal compensation that goes above the legal minimum is taxable. The tax-free part depends on the type of dismissal:

• Unfair dismissal: 33 days of salary per year of service, up to 24 monthly payments.
• Objective dismissal: 20 days of salary per year of service.

For dismissals since 2025, the tax-free amount is also capped at EUR 180,000. Anything above these levels is taxable.

If you agree your exit with your employer, or settle at a conciliation hearing, the tax-free part is still only the legal amount. Extra money in the settlement is taxable.

The exemption does not apply if there is no genuine dismissal. An agreed exit that is really a voluntary departure dressed up as a dismissal does not qualify. The type of dismissal, and whether it is a real one, decide your result. Check both before you sign anything.

The 30% reduction for irregular income

You can reduce taxable income by 30% if it was generated over more than two years, or if it is irregular and not received in successive periods. The income that counts each year is capped at EUR 300,000. Lower caps apply to some types of income.

For severance, the reduction applies only to the taxable excess over the exempt amount. It applies only if its conditions are met.

You cannot use the reduction if you applied it to similar income in the previous five years.

Estimating your tax

1. Work out the tax-free part of your severance using the days-per-year rule and the EUR 180,000 cap.
2. Treat anything above that as taxable income.
3. Apply the 30% reduction to that excess if you qualify and have not used it for similar income in the last five years.
4. Add the result to your other income for the year. It is taxed at progressive rates.
5. Expect the final figure to differ from the withholding.

For a payment that looks unusual, ask a tax adviser or the tax agency before you sign. The FAQ below covers common questions.

Frequently asked questions

Is a settlement agreed with my employer fully tax-free?

No, an agreed exit is tax-free only up to the legal amount of compensation. Anything above that amount is taxable.

Is there a cap on the tax-free part of severance?

Yes, the tax-free part is capped at EUR 180,000 for dismissals since 2025, even if the legal minimum would be higher. Compensation above that cap is taxable.

Can I use the 30% reduction twice in a few years?

No, you cannot use the 30% reduction if you applied it to similar income in the previous five years. The reduction also needs income generated over more than two years, or irregular income not received in successive periods. The yearly base for the reduction is capped at EUR 300,000.

Why is the tax withheld on my bonus different from my usual rate?

Your withholding percentage is recalculated when the bonus is paid, based on your expected annual income including the bonus. It is only a provisional payment, and the final tax is settled in your annual income tax return.