Processing wages are subject to withholding on the gross amount without deducting unemployment benefits

The Directorate General of Taxes (DGT) has clarified the tax treatment of processing wages (salarios de tramitación), a concept that arises when a worker must reimburse unemployment benefits unduly received after returning to work. The ruling establishes how companies must proceed when applying Personal Income Tax (IRPF) withholdings in these cases.

What the DGT has resolved

The binding ruling determines that processing wages constitute employment income. Therefore, their withholding must be determined following the general procedure established in the Personal Income Tax Regulations.

The key point of the resolution is that the withholding must be applied to the gross amount of said wages. This means that the company cannot deduct from the withholding base the amount that the worker must reimburse in respect of unemployment benefits. Likewise, this income must be integrated with the rest of the remuneration that the company pays for the employment relationship during the same fiscal year.

What this means for you

This criterion has a direct impact on both companies and workers in situations involving the regularization of benefits:

• For companies: They are obliged to apply the withholding to the total amount of the processing wages. It is not possible to make a prior deduction of the unemployment benefit to calculate the applicable withholding rate. Additionally, they must add these amounts to the employee's other remuneration for the global calculation of the fiscal year.
• For workers: The withholding will be applied to the entirety of the processing wages. The amount of the unemployment benefit that must be returned does not reduce the base upon which the withholding is calculated at the time of payment of said wages.

What should be done

In light of this resolution, companies must ensure that their payroll systems and withholding settlement processes comply with the integration of this income and the calculation based on the gross amount. Workers should take into account that the withholding burden on these specific wages will be applied without considering the reimbursement of the benefit as a deductible element in the monthly withholding calculation.