Back pay for three-year seniority increments must be attributed to the year they were due

The tax treatment of retroactive payments derived from the update of three-year seniority increments (trienios) has been defined following a recent resolution by the Directorate General of Taxes (DGT). The issue focuses on determining in which tax year these earnings from work must be taxed when they are received in a period different from the one to which they are legally entitled.

What the DGT has resolved

The administration establishes that earnings from work must be attributed to the tax period in which they are due. In the event that, due to circumstances not attributable to the taxpayer, these payments are received in years subsequent to their due date, the regulations require them to be attributed to the original periods.

To comply with this obligation, the taxpayer must submit a supplementary tax return corresponding to the year in which the right to payment was already due. The DGT specifies that if the seniority increments became due in a certain year, the amended tax return must be filed between the date the payment is received and the end of the filing period for the following tax year.

What this means for you

If you are a worker receiving a payment for accumulated seniority increments from previous years, you cannot declare that entire income in the year you receive the money in your bank account. Doing so could lead to an incorrect determination of the taxable base and the applicable tax rates.

The operational consequence is that the income must be fiscally "spread" backwards to the years in which it should have been collected. This implies that the taxpayer must make an adjustment to their Personal Income Tax (IRPF) returns for past years to reflect the reality of their earnings from work at each point in time.

What should be done

Upon receiving these payments, it is necessary to precisely identify the years in which each three-year increment was due. Once the periods are determined, the corresponding amended tax returns must be filed. Since this is a situation not attributable to the taxpayer, this procedure is carried out without the application of penalties or late-payment interest, provided that the deadlines established by current regulations are met.