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V3364-20 16 November 2020 · SG de Impuestos sobre la Renta de las Personas Físicas Criterion in force
IRPF · rendimientos de actividades profesionales

Compensation for cancellation of professional engagements subject to Income Tax withholding

An association has requested clarification on whether Income Tax (IRPF) withholding should be applied when paying compensation to professionals for the cancellation of cultural performances. The Directorate-General for Tax (DGT) has ruled that such compensation replaces income from professional activities and must, therefore, be subject to withholding.

The question raised

Subjecting the aforementioned compensations to withholding, taking into account also that professionals issue invoices with withholding, as they are registered under headings in the second and third sections of the Economic Activities Tax schedules.

The DGT's ruling

Compensations for the cancellation of a professional service provision are classified as income from professional activity as they substitute for income from the activity. As they are income subject to withholding, the rate provided for in Article 95.1 of the Personal Income Tax Regulations must be applied. The payer is responsible for performing the withholding and issuing the corresponding certificate.

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