Workers claiming wages through legal action cannot apply the irregularity reduction

The application of the reduction for irregular income in Personal Income Tax (IRPF) has raised doubts when payments are obtained through judicial processes. The core of the debate lies in determining whether the generation period of that income extends until the date of the ruling or if it must be limited to the time during which the services were provided.

What the DGT has resolved

The Directorate General of Taxes (DGT) has clarified that, for employment income to qualify for the reduction provided for in Article 18.2 of the IRPF Law, the generation period must be more than two years. In this sense, the administration establishes that said period must be understood as limited to the material period of service provision.

The resolution indicates that the existence of a judicial process to claim wages does not have the capacity to extend the generation period. Therefore, the time elapsed from the provision of the service until the obtaining of a final ruling does not count toward meeting the requirement of temporal irregularity required by the regulations.

What it means for you

If you are a worker who has had to resort to legal action to collect wages or remunerative concepts accrued in previous years, this criterion is decisive. Although the receipt of the money is late and occurs years after having worked, the generation period for tax purposes is fixed on the years in which the labor activity was effectively performed.

This implies that, if the services provided were concentrated in a period of less than two years, you will not be able to apply the irregularity reduction to your income, even if the ruling ordering the payment is issued much later.

What should be done

It is necessary to analyze the nature of the claimed concepts and the exact period in which the services were provided. The application of this reduction requires a correct temporal delimitation of the activity to avoid inspections by the Tax Agency. It is recommended to assess the situation of each legal claim against the requirements of the IRPF Law before declaring the income as irregular earnings.