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V2810-18 26 October 2018 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · rendimientos del trabajo

Payments under an employment contract cannot be considered tax-exempt scholarships

A query was raised regarding whether research grants meet the requirements for tax exemption as scholarships under Article 7.j) of the Personal Income Tax Act (LIRPF). The Directorate General for Tax (DGT) ruled that, because an employment contract exists, the payments do not constitute scholarships and must be taxed as employment income.

The question raised

Whether they meet the requirements to be exempt from taxation through the application of Article 7 j) of the Personal Income Tax Law.

The DGT's ruling

Amounts paid within the framework of an employment contract are not considered scholarships. The nature of scholarships is that of a grant or aid and not of a salary or consideration, which is incompatible with the existence of an employment contract. Therefore, amounts received by researchers under an employment contract must be taxed as income from employment and are subject to withholding.

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