Imputation of salary arrears following a judicial ruling for Personal Income Tax (IRPF)

Determining the moment when employment income derived from a judicial process must be taxed is a point of particular relevance for the correct settlement of Personal Income Tax (IRPF). The Dirección General de Tributos (DGT) has clarified the criteria for temporal imputation in these cases.

What the DGT has ruled

The inquiry addresses the issue of the temporal imputation of employment income that is pending a judicial ruling. The established criterion indicates that this income must be imputed to the tax period in which the judicial ruling becomes final.

In the specific case analyzed, since the judicial order is the document that quantifies the salary differences, the imputation of said income corresponds to the tax year in which said ruling becomes final. For example, if the quantification occurs through an order in February 2025, the tax obligation arises in the 2025 tax year.

Furthermore, the DGT confirms the applicability of the 30% reduction on such earnings when the period of their generation is greater than two years. This reduction is subject to the condition that no reductions of a similar nature have been applied in the previous five tax periods.

What this means for you

If you are the beneficiary of a judicial ruling that recognizes salary arrears, the year in which you must declare that income is not the year in which the differences were generated, but the year in which the judicial ruling becomes final. This is fundamental to avoid errors in your tax return and potential penalties from the Tax Administration.

Additionally, the possibility of applying the 30% reduction represents a significant tax benefit if the unpaid salaries refer to a prolonged period of time. It is necessary to verify that this benefit has not been used in the previous five years in order to apply it correctly.

What you should do

Upon receiving a judicial ruling that quantifies salary differences, it is necessary to identify the exact date on which the ruling becomes final to determine the corresponding fiscal year. It is recommended to analyze the generation period of the arrears to confirm whether the requirements for the 30% reduction are met and to verify the history of reductions applied in previous years. Each situation must be assessed individually according to current regulations.