Awards for the best undergraduate thesis will be taxed as professional income
The tax classification of academic and scientific awards has raised doubts regarding their treatment in Personal Income Tax (IRPF). Recently, the Directorate General of Taxes (DGT) has clarified the scenario for students or authors who receive a monetary amount for their undergraduate thesis.
What the DGT has resolved
The administration has determined that the award for the best undergraduate thesis must be classified as income from professional economic activity. This classification is due to the fact that the award is not included within the specific exemptions and, fundamentally, because it does not involve a transfer of intellectual property rights.
As it is a scientific award that does not enjoy the exemption provided for in the regulations, the DGT establishes that the income is obtained in a notoriously irregular manner over time. Consequently, the criteria established in the IRPF Regulations for this type of income apply.
What this means for you
If you are a student or author receiving an award for an academic work, you should consider the following points:
- Tax classification: The amount will not be treated as income from movable capital or as an exempt prize, but as income derived from a professional activity.
- Applicable reduction: As it is considered irregular income, you are entitled to apply a 30 percent reduction on the net income obtained.
- Regulatory basis: This criterion is based on the IRPF Law and the tax Regulations, focusing on the nature of the income and the absence of the transfer of rights.
What should be done
It is necessary to analyze the exact nature of the award received and the documentation that supports it. The absence of a transfer of intellectual property rights is the determining factor that shifts the taxation into the scope of professional activity. It is recommended to assess the particular situation of each case to ensure that the reduction for irregular income is correctly applied in the tax return.
Frequently asked questions
- Why is it not considered an exempt prize?
- Because it does not meet the specific exemption requirements and does not include the transfer of intellectual property rights.
- Can I apply any reduction when receiving this award?
- Yes, as it is considered income obtained in a notoriously irregular manner, the 30% reduction on net income is applicable.