Imputation of back pay in Personal Income Tax (IRPF): when employment income must be taxed

The Dirección General de Tributos (DGT) has issued a relevant ruling regarding the tax treatment of employment income received with delay. The central issue lies in determining whether this income should be taxed in the year it is actually collected or in the year in which the worker had the right to demand it.

What the DGT has ruled

The inquiry analyzes whether income received in 2024, but corresponding to 2023, should be imputed to the year of receipt or the year of exigibility. The DGT has determined that, in accordance with Article 14.2.b) of the Law 35/2006 (Ley del IRPF), when income is received in periods different from its exigibility due to circumstances not attributable to the taxpayer, it must be imputed to the period in which it was due.

Exigibility is defined as the moment when the recipient has the power to claim payment, based on the rules or agreements existing at that time. Consequently, if the back pay corresponds to the 2023 tax year, it must be taxed in that specific tax period.

What this means for you

This ruling has a direct impact on workers who receive back payments from previous years. The fact of receiving the money in a specific year does not grant the right to declare that income in the current tax year. If you have received income that legally belonged to a previous year, the regulations require that such income be attributed to the year in which the right to collect it was generated.

What you should do

Upon receiving back payments that correspond to closed tax periods, it is necessary to evaluate the tax situation of each affected year. If the income should have been taxed in a previous year, the correct course of action is to file a supplementary tax return for that specific year to regularize the situation with the Tax Administration.