Executives receiving ICU units will be taxed as employment income

The legal nature and the timing of taxation for complex variable remuneration systems have been recently clarified by the Tax Administration. Specifically, the tax treatment of ICU units, a remuneration mechanism commonly used for executive profiles, has been analyzed.

What the DGT has ruled

The Dirección General de Tributos (DGT) has determined that the amount received through ICU units must be classified as employment income, given that its origin derives directly from the employment relationship existing between the executive and the company. Regarding the timing of when said amount must be taxed, the ruling establishes that the temporal imputation corresponds to the tax period in which the income becomes due. This means that the tax obligation arises when all necessary conditions are met so that the beneficiary can collect the payment.

Furthermore, the inquiry addresses the possibility of applying specific tax benefits. It is established that the 30 percent reduction provided for in the regulations may be applied if the following requirements are simultaneously met:

• The income must have a generation period of more than two years.
• The income must be imputed in a single tax period.
• The other legal requirements established in the current regulations must be met.

What this means for you

If you are part of a management team and your remuneration package includes ICU units linked to tenure or company value, you should consider that these amounts do not have a different treatment from a conventional salary in terms of their nature. The tax impact will depend strictly on the moment when the collection conditions become effective, which determines the fiscal year in which you must declare such income.

The key lies in enforceability. It is not the moment of the unit's generation, but the moment when the right to collection is firm and enforceable.

What you should do

It is necessary to analyze the structure of variable remuneration plans to precisely determine the year in which the ICU units become due. The correct application of the 30 percent reduction requires precise management of the generation periods and temporal imputation, ensuring that the criteria of the Personal Income Tax (IRPF) Law and its Regulations are met. It is recommended to assess each particular case to ensure that the imputation of this income is carried out in the correct fiscal year.