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V3290-15 26 October 2015 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · rendimientos del trabajo

30% reduction for death or disability benefits may apply if imputed to a single tax period

A local council has enquired whether payments made to workers due to death or disability are subject to Income Tax (IRPF) withholding and whether the reduction for irregular income can be applied. The Directorate General for Taxes (DGT) clarifies that these benefits constitute employment income, except for those intended to cover health expenses not covered by Social Security. Furthermore, any funeral benefits exceeding actual expenses are classified as irregular income.

The question raised

1.) Applicable withholding in Personal Income Tax on the amounts paid.

The DGT's ruling

Grants for death or disability are income from employment subject to withholding, except those intended to cover health expenses not covered by the Health Service or Mutual Fund for the restoration of health. Funeral benefits are exempt up to the limit of the expenses incurred; any excess constitutes notoriously irregular income if imputed in a single tax period. In these cases of irregularity, the 30% reduction provided in Article 18.2 of the Personal Income Tax Law (LIRPF) is applicable for calculating the withholding.

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