15% withholding tax on salary supplement arrears following a court ruling

The Directorate General of Taxes (DGT) has issued a relevant ruling regarding the tax treatment of employment income received as arrears, specifically when these derive from a final court ruling that recognizes salary supplements from previous years.

What the DGT has ruled

The inquiry focused on determining what type of withholding should be applied to amounts corresponding to salary supplements received retroactively. The body has specified that employment income derived from a final court ruling must be imputed to the tax period in which said resolution becomes final.

Consequently, if the collection of these amounts occurs in a period later than their imputation period, a 15% withholding rate for arrears corresponding to previous years must be applied, in accordance with the provisions of the Personal Income Tax (IRPF) Regulations. The administration emphasizes that withholdings are imputed to the period in which the income is imputed, regardless of when they are actually applied.

What this means for you

If you are a worker receiving a retroactive payment for salary supplements following a judicial resolution, your tax situation is defined by the date the ruling becomes final and not necessarily by the year to which the earned salaries belong. This implies that:

• The income will be included in your taxable base for the year in which the ruling becomes final.
• A fixed withholding of 15% will be applied to those amounts, as they constitute arrears from previous years.
• The moment of actual collection does not alter the imputation period of the income.

What you should do

It is necessary to analyze the date the judicial resolution becomes final to determine exactly which tax year you must declare this income. Since the application of the 15% withholding is linked to the nature of the arrears, it is essential to verify that the withholding calculation on the payslip matches the provisions of the IRPF Regulations and the IRPF Law. It is recommended to assess each particular situation to ensure that the imputation of income and withholdings is carried out correctly.