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V1513-24 20 June 2024 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · rendimientos del trabajo

Payments received via court ruling following unfair dismissal are taxed as employment income

A doctor enquired whether receiving back pay following a court ruling that annulled her unfair dismissal constituted tax-exempt compensation or employment income. The DGT has determined that these are employment income and must be attributed to the tax year in which the ruling becomes final.

The question raised

Taxation under Personal Income Tax (IRPF).

The DGT's ruling

The amounts received due to the cancellation of an improper dismissal are substitute remuneration qualifying as income from employment pursuant to Article 17.1 of Law 35/2006. As they do not constitute compensation for personal damages, they do not benefit from an exemption. This income must be attributed to the tax period in which the judicial ruling determining its amount becomes final, in accordance with Article 14.2.a) of the Personal Income Tax Law.

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