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V3108-23 28 November 2023 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · salarios de tramitación

Back pay from voided dismissals is attributed to the tax year in which the judgment becomes final

A worker inquired about the taxation and withholding rates applicable to back pay received following the declaration of a void dismissal. The Directorate General for Taxes (DGT) ruled that these earnings must be attributed to the year in which the judgment becomes final, with withholding calculated according to general procedures.

The question raised

Withholding applicable to back pay for processing.

The DGT's ruling

Back pay for processing is considered income from employment that must be attributed to the tax period in which the judgment declaring the nullity of the dismissal becomes final. Withholding shall be determined using the general procedure, integrating these amounts with other employment income for the year. The reduction for a generation period exceeding two years must be considered if applicable according to the Regulations. These amounts are not considered arrears for withholding purposes if they are attributed to the tax year in which they become final.

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