Companies may pay garnished wages into third-party accounts if they withhold the required amount

Complying with garnishment orders for wages and other labor-related amounts poses operational challenges for companies, especially when a worker requests that their earnings be paid into an account not held in their name. The Directorate General of Taxes (DGT) has defined the limits of this practice to prevent payers from incurring joint liability.

What the DGT has ruled

The inquiry analyzes whether a company can pay a severance indemnity or a settlement amount into a third party's bank account (for example, the worker's partner) if there is written authorization and the correct tax and documentary attribution to the debtor's name is maintained. The criteria establish that payment into an account with different ownership does not constitute a breach of regulations, provided two conditions are met:

• Prior withholding: The payer must deduct the amount that must be paid to the Administration before making any payment.
• Transparency: The change of account must not be used to hide the ownership of the income.

A breach will occur if the total amount is paid without withholding the affected portion, or if this mechanism is used to evade the execution of the garnishment.

What this means for you

For companies, this criterion establishes a roadmap to avoid joint liability arising from incorrect compliance with garnishment orders. It is essential that the payroll or treasury department ensures that the withholding of the garnishable portion is carried out prior to the movement of funds to the third-party account.

For workers, it is necessary to keep in mind that severance payments are also subject to garnishment. Unlike ordinary wages, these indemnities do not enjoy the same non-seizability limits, which means the Administration may claim a larger portion of these amounts.

What should be done

In garnishment situations, companies should:

• Verify the accuracy of the garnishable portion before any transfer.
• Require written authorization from the worker if they request payment into a third-party account.
• Maintain documentary traceability, ensuring that the labor and tax attribution always remains that of the debtor worker.