The Directorate General of Taxes (DGT) reminds that the imputation of earned income must be carried out in the tax period in which it is due.
The higher remuneration resulting from this update is usually paid in the year after the one to which it corresponds.
It is usual for collective agreements to establish that each year’s remuneration must be updated by the CPI. However, as the variation in the CPI is not known until 31 December of each year, the higher remuneration resulting from this update is usually paid in the year after the one to which it corresponds.
Let us imagine that an employee in March 2022 is paid the back pay for the CPI variation for the year 2021. The question that arises is whether this higher remuneration should be imputed to personal income tax in the year of payment or in the year to which the update corresponds.
Imputación temporal en el IRPF
The temporary imputation of income is set out in Article 14 of the LIRPF, which in paragraph 1 establishes as a rule for earned income its imputation “to the tax period in which it is payable by the recipient”.
However, together with this general rule, section 2 of the same article includes special rules for temporary imputation, of which it is worth mentioning here the rule set out in paragraph b), which states the following:
“When, due to justified circumstances not attributable to the taxpayer, the income derived from work is received in tax periods other than those in which it was due, it shall be attributed to those periods and, where appropriate, a supplementary self-assessment shall be made, without penalty or late payment interest or any surcharge. Where the circumstances set out in paragraph a) above apply, the income shall be deemed to be payable in the tax period in which the court decision becomes final.
The self-assessment shall be submitted in the period between the date on which they are received and the end of the immediately following tax return period.”
In the binding consultation V0969-22, dated 3 May 2022 of the DGT, the querier questions the temporary imputation of the arrears of the agreement due to the variation of the CPI corresponding to the financial year 2021″, which have been “paid in March 2022”, and to “clarify how they should be taxed since we have no indications and we do not know whether they should be taxed as indicated in article 14.2 b) of the LIRPF or as income in 2022.
The DGT replies, taking into account the aforementioned data, that the application of the aforementioned time imputation regulations leads us to consider that the imputation of the income in question should be made to the tax period in which it is due, which is understood to be in 2022 – since its calculation is given by the CPI corresponding to 2021, a calculation that requires the close of the financial year -, and therefore it will be to the 2022 tax period that its imputation corresponds.
For further information, please consult your tax advisor.