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A worker inquired about the taxation and withholding rates applicable to back pay received following the declaration of a void dismissal. The Directorate General for Taxes (DGT) ruled that these earnings must be attributed to the year in which the judgment becomes final, with withholding calculated according to general procedures.
This ruling clarifies the timing for tax reporting and withholding obligations regarding back pay resulting from legal disputes over void dismissals.
The tax team reviews your specific situation.
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