Company mergers and the two-payer limit for Personal Income Tax (IRPF)

The Dirección General de Tributos (DGT) has issued a relevant ruling regarding the tax situation of employees when their company undergoes a merger by absorption. The central issue lies in determining whether the subrogation of employment contracts into the new entity implies the existence of two payers, which would alter the income threshold for the obligation to file a Personal Income Tax (IRPF) return.

What the DGT has ruled

The administration has ruled that a merger by absorption constitutes a business succession. In this process, the acquiring company subrogates into all the labor rights and obligations of the absorbed entity, in accordance with Royal Legislative Decree 2/2015 (Workers' Statute).

Due to this legal subrogation, the multiplicity of employers observed during the transition process does not entail the existence of more than one payer for the purposes of IRPF regulations. Consequently, the annual limit of €22,000 provided for in Article 96.2.a) of Law 35/2006 (LIRPF) remains in effect to determine the obligation to file a tax return.

What this means for you

If you are an employee whose company has been absorbed by another, this ruling provides you with legal certainty. You will not be considered a person with two payers simply because the entity managing your payroll has changed through a merger.

This implies that if your total income does not exceed the €22,000 annual threshold, you will not be required to file an income tax return based on this concept, avoiding the confusion that could arise from an erroneous interpretation of multiple employers.

What you should do

It is essential to verify that the operation was carried out under the figure of the subrogation of labor rights and obligations. Although the DGT has clarified this point, every situation of labor mobility or change of ownership must be analyzed to confirm that the requirements for business succession are met and that the income limit is correctly applied according to current regulations.