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V1923-17 19 July 2017 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · salarios de tramitación

Back pay is taxed in the year a judgment becomes final and allows for a 30% reduction

A worker inquires about the taxation of back pay received following a ruling of null dismissal and the treatment of the repayment of unemployment benefits received unduly. The DGT rules that back pay must be attributed to the tax year in which the judgment becomes final and that unemployment benefits must be excluded from tax returns where they were incorrectly included.

The question raised

Inquiry is made regarding the taxation under Personal Income Tax (IRPF) of the amount received for back pay salaries and the deductions made for unemployment benefits.

The DGT's ruling

Back pay salaries are considered income from employment and must be attributed to the tax period in which the judicial ruling determining the right to them becomes final. As they cover a period exceeding two years, the 30% reduction provided for in Article 18.2 of the Personal Income Tax Law (LIRPF) applies. Regarding reimbursed unemployment benefits, as they are incompatible with salaries, they must be excluded from the tax return in which they were improperly included, and the taxpayer may request the rectification of said self-assessments.

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