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A trainee civil servant has requested clarification on how to tax back pay received via a court ruling after being declared unsuitable for the role. The Directorate General for Taxes (DGT) has determined that amounts pending a judicial ruling must be attributed to the period in which the judgment becomes final.
This ruling clarifies the timing for tax reporting back pay resulting from litigation, ensuring that taxpayers report income in the year the legal certainty is established rather than when the debt was originally incurred.
The tax team reviews your specific situation.
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