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A query was raised regarding whether compensation for workplace harassment agreed upon during a conciliation process is exempt from Personal Income Tax (IRPF). The Directorate General for Taxes (DGT) ruled that, as it was not judicially recognised, the amount must be taxed as employment income.
Question raised: Subject to taxation of the aforementioned compensation by Personal Income Tax. Withholdings.
For compensation for personal injury civil liability to be exempt, its amount must be legally or judicially recognized. As it is a conciliation agreement and not a judicial resolution, the compensation for workplace harassment is considered employment income. Therefore, it is subject to Personal Income Tax (IRPF) and the withholding system.
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