Imputation of back pay for triennials and sexennials in Personal Income Tax (IRPF)

The Directorate General of Taxes (DGT) has issued a relevant criterion regarding the management of income from employment when received retroactively, specifically concerning back pay for the granting of triennials and sexennials.

What the DGT has ruled

The inquiry addresses the issue of the temporal imputation of these back payments in Personal Income Tax (IRPF). The criterion establishes that, unless the payments depend on a final judicial ruling, the income must be imputed to the tax period in which it becomes enforceable for the recipient.

In the case of supplements for triennials or sexennials, enforceability is determined by the administrative resolution that establishes the payment. Therefore, if each of these supplements was enforceable in previous tax years, the imputation of the amounts must be carried out in the periods corresponding to those years, and not in the year in which the actual payment is made.

What this means for you

This criterion directly affects workers who receive retroactive payments of salary supplements in a tax year different from the one to which they are entitled by right. The applied regulations, Law 35/2006 and Law 58/2003, determine that the moment of accrual for tax purposes is not the moment of collection, but rather the moment of administrative enforceability.

This implies that the taxpayer must take into account that the tax burden must be distributed according to the years in which the right to payment was generated, avoiding concentrating all the income in the current tax year, which could alter the progressivity of the tax.

What you should do

Upon receiving payments for retroactive concepts, it is necessary to:

• Identify the administrative resolution that determines the enforceability of each triennial or sexennial.
• Verify that the imputation in the income tax return coincides with the years in which the right was enforceable.
• Assess the particular situation of each case to ensure that the declaration correctly reflects the chronology of the income.