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V3258-20 30 October 2020 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · salarios de tramitación

A 15% withholding tax must apply to back pay paid in 2020 for 2019 arrears

A company has requested guidance on how to withhold Personal Income Tax (IRPF) when paying back wages following a final court ruling. The Directorate General for Taxes (DGT) has ruled that, as these earnings are attributable to the previous financial year, they are classified as arrears.

The question raised

Withholdings on account of Personal Income Tax.

The DGT's ruling

Back pay salaries are earnings from employment that are attributed to the tax period in which the judicial resolution becomes final. As they are income from a previous fiscal year, they are considered arrears and the 15% withholding rate must be applied. The withholding must be applied to the gross amount of the salaries without deducting any indemnities or benefits unduly received.

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