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V1753-24 16 July 2024 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · título sucesorio

Death compensation for executives subject to Inheritance and Gift Tax

A query was raised regarding whether compensation agreed upon by companies to be paid to a widow following the death of a CEO should be taxed under Personal Income Tax (IRPF) or Inheritance and Gift Tax. The Directorate General for Taxes (DGT) has determined that it must be taxed under Inheritance and Gift Tax.

The question raised

Taxation of the aforementioned indemnity.

The DGT's ruling

The temporary income received by beneficiaries following the death of a partner or employee does not constitute earned income from the deceased's employment nor a personal right of the deceased. In the absence of an express provision requiring taxation under Personal Income Tax (IRPF), these amounts are considered succession rights. Therefore, they must be taxed under Inheritance and Gift Tax, regardless of whether they are received as a lump sum or in periodic installments.

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