Legal representative fees below the official tariff and their impact on Personal Income Tax

The determination of income for Personal Income Tax (IRPF) often raises doubts when agreed prices do not align with official scales. Recently, the Dirección General de Tributos (DGT) has issued a relevant ruling regarding the application of the market value valuation rule in the case of legal representatives (procuradores).

What the DGT has ruled

The query analyzed whether negotiating fees with a client for an amount lower than that established in the professional tariff carried automatic tax effects for IRPF. The DGT has ruled that setting fees below the tariff does not automatically trigger the market value valuation rule provided for in Article 28.4 of the Law of IRPF (LIRPF).

According to the Administration's criteria, the application of said valuation rule only proceeds in two specific scenarios:

• When the provision of services is carried out free of charge.
• When the agreed remuneration is notoriously lower than the normal market value.

The resolution emphasizes that the mere failure to comply with the tariff is not sufficient evidence to consider that the price is notoriously lower than the market price. Determining whether a price is truly lower than the normal value is a question of fact that must be analyzed in each particular case.

What this means for you

This criterion has a direct impact on self-employed professionals practicing the activity of legal representation. If you agree on fees with your clients that are lower than the scales of RD 434/2024, you should not assume that the Tax Agency will automatically force you to declare higher income based on market value.

However, the distinction between a commercial discount and a notoriously lower remuneration is key. The Administration maintains the power to verify whether the agreed price deviates from the economic reality of the sector, but the burden of proof and the nature of the price must be evaluated individually.

What you should do

When considering agreeing on fees below the official tariffs, it is necessary to consider market reality and the justification for such rates. Every professional situation is different, and the application of the LIRPF regulations will depend on the ability to demonstrate that the agreed price maintains a reasonable relationship with the normal value of the service.