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V0741-22 5 April 2022 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · rendimientos del trabajo

Back pay from court rulings is taxed in the year the judgment becomes final and no reduction applies if the period is under two years

A civil servant has enquired about the taxation of back pay and late payment interest received following a court ruling. The DGT has determined that back pay must be attributed to the year in which the judgment becomes final, and that late payment interest is taxed as capital gains.

The question raised

Taxation in Personal Income Tax (IRPF).

The DGT's ruling

Income from employment recognized by judicial sentence is attributed to the tax period in which the resolution becomes final. The reduction for a generation period exceeding two years is not applicable if the arrears cover a period of 22 months. Late payment interest, due to its compensatory nature, is taxed as capital gains in the savings tax base in the year the sentence becomes final.

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