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V0272-23 15 February 2023 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · intereses de mora

Late payment interest on unpaid wages is taxed as a capital gain for Income Tax purposes

A query was raised regarding whether late payment interest for unpaid wages, as provided for in the Workers' Statute, is subject to Personal Income Tax (IRPF). The Directorate-General for Tax Assurance (DGT) ruled that, due to its compensatory nature, such interest must be taxed as a capital gain rather than as income from movable capital.

The question raised

Taxation in Personal Income Tax (IRPF) of the interest under Article 29.3 of the Workers' Statute.

The DGT's ruling

Late payment interest on wages is compensatory in nature as it provides redress for damages. Therefore, pursuant to Articles 25 and 33.1 of Law 35/2006, it must be classified as capital gains. No withholding tax is applicable to these amounts as they are not subject to withholding under Article 75 of the Personal Income Tax Regulations.

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