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V1177-19 28 May 2019 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · rendimientos del trabajo

Academic excellence award classified as employment income and subject to withholding tax

A foundation sought clarification on whether an award for the best academic record in Education was exempt from or subject to tax withholding. The Directorate General for Taxes (DGT) ruled that it is neither a scholarship nor an exempt prize, but rather constitutes employment income.

The question raised

Subject to withholding of the prize, or whether it is exempt from taxation.

The DGT's ruling

The prize is not a scholarship because it is awarded as recognition for an academic record already completed and not as a grant for studying. As it constitutes income from employment, it must be subject to withholding according to the RIRPF. The 30% reduction is not applicable as it is not income that is notoriously irregular nor does it have a generation period exceeding two years. The minimum withholding rate of 2% also does not apply because the relationship between the payer and the prize winner is circumstantial and not a seasonal contract.

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