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V1405-21 13 May 2021 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · rendimientos del trabajo

Backdated professional career increments are taxed in the year they become administratively enforceable and may qualify for a reduction

A civil servant has enquired about the taxation of backdated professional career increments received in 2020 that relate to previous years. The Directorate General for Taxes (DGT) has ruled that these must be attributed to the period in which the administrative resolution made them enforceable. Furthermore, they may qualify for the 30% tax reduction if the requirements regarding the generation period are met.

The question raised

Taxation in Personal Income Tax (IRPF) of the aforementioned back pay.

The DGT's ruling

Back pay is considered income from employment, and its temporal imputation is made to the tax period in which it becomes enforceable according to the administrative resolution of recognition. If imputed to periods prior to receipt, a supplementary tax return must be filed without penalties or interest. Likewise, the 30% reduction is applicable for having a generation period exceeding two years, provided that no other similar reductions have been applied in the five previous tax periods and they do not exceed 300,000 euros annually.

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